Story of Sachin Bansal: From Flipkart to Navi's IPO

A luck so bad, if he built a cemetary, people would stop dying.

When we talk about e-commerce in India, most of us can only think of two names: Flipkart and Amazon. Since Flipkart is a company with Indian roots, we connect more with it. In September 2007, two IIT Delhi students, Sachin Bansal and Binny Bansal, started Flipkart as a comparison website for products available to buy online. But very soon, they pivoted and became an online bookstore.

Sachin served as the CEO, and Binny served as the company's COO. In 2010, after Flipkart became the number 1 online book store in India, they started selling other products as well. And from there onwards, there was no stopping for them. Flipkart became India’s 2nd unicorn in 2012 upon raising $150 million from ICONIQ Capital. Many acquisitions happened, and Flipkart raised a lot of funds and was the leading e-commerce website in India, but Life had other plans for its founders. Let’s dig into it!

The Walmart Deal: When Hope Led to Hell

Everything was going well for Flipkart, but in 2016, Sachin Bansal was forced out of the position of CEO by the investors because of some poor decisions made in the past, making Binny Bansal the new CEO. Sachin was not happy about this, as he was also forced out of the operations.

In 2018, Walmart offered Flipkart to buy their majority stake. Sachin felt that this deal would be good for them because it would help them grow Flipkart more. Sachin wanted to work at Flipkart, but he had bigger plans. He felt he would be able to give an exit to some of his investors and would also be able to buy back some of his stakes in Flipkart so that he could take up the position of CEO again, as Binny didn’t want to be the CEO. But the deal backfired.

Investors were not happy with Sachin’s terms. At one point, Sachin even refused to sign the deal. However, the deal happened, and as part of it, only one co-founder could work with Flipkart after the Walmart acquisition, so they chose Binny.

Dreams got Shattered, but a New Hope Blossomed.

Sachin had to quit Flipkart and sell all his shares to Walmart. Initially, Walmart was only going to acquire 55%, but after this, Walmart bought a 77% stake in Flipkart for $16 billion in 2018.

Sachin exited Flipkart as a Billionaire, but he wasn’t happy as his dream was to grow Flipkart and make it a $100 billion company. This was his Facebook post after he quit:

6 months later, Binny Bansal also left the company after an allegation of serious personal misconduct was made against him, which he strongly denied.

Sachin took a break for some time and bounced back in 2019. He founded BACQ Acquisitions Pvt. Ltd. with one of his batchmates, Ankit Agrawal, from IIT Delhi. Ankit has experience working in the banking sector. He previously worked at Deutsche Bank and Bank of America. They invested in startups that they believed in through BACQ.

Sachin had big plans. They rebranded BACQ as Navi, the Hindi word for New. They wanted to make Navi a full-fledged fintech company, and instead of focusing on just one thing, they wished to provide a wide range of products and services. What was unique about them is that, unlike any other fintech startup, they focused on adding value to their customers through their offerings. They hoped customers would come of their own volition.

Something New or Navi Emerged

Navi was thinking more like a bank. They were aiming for a Universal Banking License. What does that mean? There are two models of banking: commercial and investment and universal banking include both of them in varied proportions.

Earlier, getting this license was very tough, and it was not as straightforward as it is today. But there are still many strict requirements that should be met. The applicant should have a successful track record of at least ten years. They need to be deemed fit and proper by the RBI, and for that, they should have great financials, credentials, and integrity. They also need a specific corporate structure and a minimum capital of ₹5 billion.

But Navi was a new company, and they were not even close to having these requirements until 2019. So, what did they do? They chose the inorganic path to grow as fast as possible. They made multiple acquisitions, including Chaitanya Rural Intermediation Development Services (CRIDS), which provided loans for 2-wheelers, education, small businesses, etc. They also acquired Essel mutual funds and DHFL General Insurance.

They rebranded CRIDS to Navi Finserv and started offering digital loans and loans against property. DHFL Insurance was renamed Navi Insurance, and Essel Mutual Funds was renamed Navi Mutual Funds. The purpose of these acquisitions was to fulfil the RBI’s Universal Banking License criteria and to provide all sorts of financial products and services through Navi.

Navi became a full-fledged NBFC and showed growth in revenue as well. From a revenue of ₹199 crores with a loss of ₹8.07 crore in FY20, their revenue went to ₹779 crores with a profit of ₹71.2 crores in FY21.

They were profitable, and Navi was planning an IPO to raise capital. This time, Sachin didn’t simply opt for raising funds through a VC; instead, he chose to launch the IPO because he didn’t want to lose his company again. He had faced the consequences once, which is why he owns 99.77% of Navi. He has invested more than ₹4000 crores in Navi till now, which is more than half of his net worth. He believes in what he is building.

Disaster Hits Again

This could have been the ‘happy ending’ for him! But, no, no. Everything was going well for Sachin and Navi. IPO was in the pipeline, but in July 2021, after years of quitting Flipkart, suddenly India’s financial crime agency, the Enforcement Directorate, asked Flipkart, Binny Bansal, and Sachin Bansal to explain why they shouldn’t face a fine of $1.35 billion for alleged violations of foreign investment laws between 2008 and 2015. This issue was not new; it started back in 2012.

Flipkart was accused of allegedly attracting foreign investment and running a subsidiary, WS Retail, which also sold goods on Flipkart and covered 30-40% of the total sales on Flipkart in 2016.

Sachin and Binny founded WS Retail before Flipkart became a marketplace, so they were not breaking any rules at that time, but when they raised funds from investors while WS Retail was still in operation and made the majority of the sale on their platform, that’s where a line was allegedly crossed, and violation of the law happened. Flipkart cooperated completely when this investigation launched, but after years of Sachin exiting Flipkart, the issue came to light again.

Sachin responded that he is no longer part of Flipkart and, therefore, is not liable to pay any charges. The case is still ongoing, along with six other cases against Sachin in different cities.

People from Delhi and a few other cities also started receiving messages from Navi that their loan was approved with their PAN no. written in the messages without any masking. The people receiving these messages had never used Navi in their lives. This issue became so big that the RBI stepped in. Many people also tweeted about it.

In a press release on 17 May 2022, RBI declared Navi unsuitable for a Universal Banking License.

You should also read about Why investors are Abandoning Flipkart.

The Bottom Line

All these things are bad for Navi, especially when they are in the midst of launching their IPO, but Sachin is showing a brave face. He responded to RBI’s decision positively; he said that he had not received anything from the RBI in writing, but they will find out the areas they might be lacking in to improve Navi and consider their options, which include applying again.

The story of our Indian e-commerce poster boy is rewarding but extremely challenging. Every time he tries to do something great, and things start going well, it seems like something stops him by placing roadblocks in his way. Maybe it’s his fate or the result of people’s jealousy. We can’t comment on that, but he is the OG entrepreneur, and we can learn a lot from him. Let’s wait and watch what Navi holds for the future.