The Indian e-commerce behemoth Flipkart, backed by Walmart, recently doled out $700 million to its employees as a “one-time discretionary” bonus. In the history of the Indian startup scene, this is the highest payment of its kind. The payout was made to compensate shareholders for the drop in value of Flipkart’s stock after the company’s decision to split from PhonePe, a financial technology firm.
By the end of 2022, PhonePe had successfully broken away from Flipkart. Shareholders of both companies’ Singapore branches will be able to buy stock in PhonePe India without having to go through the Singapore branch. After splitting from Flipkart, PhonePe established a new company headquarters in India. The fintech behemoth has recently raised $850 million to fund its expansion into new markets like e-commerce.
Flipkart has been thinking about going public for a while now, and has considered a second funding round from investors. Amazon, one of Flipkart’s main competitors, has decided to reduce its presence in India and even shut down some of its operations there. However, Reliance, India’s largest retail chain’s parent company, is expected to eventually overtake Amazon and Flipkart in the race for the country’s $150 billion e-commerce market.
The payout, which came at a pivotal time for Flipkart, benefited over 20,000 active and former employees. The company, which competes with Amazon in India, has used up the majority of the $3.6 billion it raised from investors like Tiger Global and SoftBank in the middle of 2021.
Chief Executive Officer Kalyan Krishnamurthy emailed employees to break the news, saying, “We have exciting times ahead, and as we continue to grow across businesses, I look forward to your continued dedication and determination to bring about the future that we envision and scale new heights together.” A representative from Flipkart has confirmed the payment was sent.
Amazon, Flipkart’s main competitor, has recently slowed its expansion in India and discontinued some of its business operations. Amazon plans to spend $15 billion in India by 2030, according to a recent announcement. Out of this total, $12.7 billion is set aside for AWS.
In summary, the amount of money that Flipkart is giving out to its employees is unprecedented in the Indian startup scene. The payout was made to compensate shareholders for the drop in value of Flipkart’s stock after the company’s decision to split from PhonePe, a financial technology firm. While Amazon, Flipkart’s main competitor, has slowed its expansion in India, Reliance is expected to eventually surpass both Amazon and Flipkart in the race for the country’s $150 billion e-commerce market. To sustain its rapid expansion, Flipkart is looking to raise a new round of capital from investors.
Who will ultimately emerge as the leading player in India’s e-commerce market remains to be seen as competition heats up. Flipkart, Amazon, or Reliance—which one will win? Nothing but time will tell.
First reported on TechCrunch
Frequently Asked Questions
Q1: Why did Flipkart give out a $700 million bonus to its employees?
A1: Flipkart distributed a $700 million bonus to its employees as a “one-time discretionary” payment to compensate shareholders for the drop in value of Flipkart’s stock following its decision to split from PhonePe, a financial technology firm. This unprecedented payout aimed to address the impact on shareholders and show appreciation to the employees for their contributions.
Q2: How does the split from PhonePe affect Flipkart and its shareholders?
A2: The split allows shareholders of both Flipkart and PhonePe’s Singapore branches to directly purchase stock in PhonePe India, streamlining the investment process. After the split, PhonePe established a new company headquarters in India and raised $850 million to fund its expansion into new markets, including e-commerce. This move enables Flipkart to focus on its core business while PhonePe gains independence and resources for growth.
Q3: Is Flipkart planning to go public and seek additional funding?
A3: Flipkart has been contemplating going public and has considered options for a second funding round from investors. Going public would enable Flipkart to raise capital, increase its visibility, and potentially enhance its competitiveness in the market. Seeking additional funding would provide the company with the financial resources needed to support its expansion plans and invest in strategic initiatives.
Q4: How does Amazon’s presence in India compare to Flipkart’s?
A4: Amazon, as Flipkart’s main competitor, has recently reduced its expansion efforts in India and even discontinued certain business operations. Meanwhile, Reliance, India’s largest retail chain’s parent company, is expected to eventually surpass both Amazon and Flipkart in the race for dominance in India’s $150 billion e-commerce market. The intense competition between Flipkart, Amazon, and Reliance underscores the dynamic landscape of India’s e-commerce sector.
Q5: How many employees benefited from Flipkart’s bonus payout
A5: Over 20,000 active and former employees of Flipkart were recipients of the $700 million bonus payout. This sizeable distribution demonstrates the company’s commitment to recognizing and rewarding its workforce for their contributions and dedication.
Q6: What was the CEO’s message to the employees regarding the bonus payout?
A6: In an email to the employees, Flipkart CEO Kalyan Krishnamurthy expressed enthusiasm about the company’s future growth prospects and conveyed gratitude for their continued dedication and determination to achieve the company’s vision. The message highlighted the exciting times ahead and encouraged employees to collectively scale new heights together.
Q7: How does Amazon’s investment plans in India compare to Flipkart’s bonus payout?
A7: Amazon recently announced plans to invest $15 billion in India by 2030. While a significant portion of this investment, $12.7 billion, is designated for its cloud computing service, Amazon Web Services (AWS), the remaining funds will contribute to the expansion and development of Amazon’s overall presence in the Indian market. The $700 million bonus payout by Flipkart serves as a means to compensate shareholders and reward employees, while Amazon’s investment represents a long-term commitment to bolstering its operations in India.
Q8: What is the current state of competition in India’s e-commerce market?
A8: The Indian e-commerce market is highly competitive, with players such as Flipkart, Amazon, and Reliance vying for market share. While Amazon has scaled back its expansion efforts in India, Reliance, backed by its parent company, India’s largest retail chain, is expected to emerge as a formidable competitor. The eventual leader in India’s e-commerce market remains uncertain as companies employ various strategies to gain an advantage. Time will reveal the outcome of this intense competition and determine which company will claim the largest share of India’s $150 billion e-commerce industry.
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