Walmart's big bet on India has suffered another major setback.
The head of Flipkart, the Indian online retailer Walmart bought in May, stepped down on Tuesday following an independent investigation into allegations of "serious personal misconduct."
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Binny Bansal, co-founder and CEO of Flipkart, resigned after the investigation by a global law firm revealed "lapses of judgement," Walmart said.
Walmart (WMT) paid $16 billion for 77% of India's biggest e-commerce company with the aim of gaining a much bigger slice of the fast growing market. Flipkart has managed to maintain a lead over Amazon (AMZN) — it accounted for nearly 40% of India's online retail market when the Walmart deal was signed.
But six months in, the deal has lost some of its gloss. Walmart told investors in October that the Flipkart purchase would shave about $740 million off its quarterly profit.
The sudden departure of Bansal, who co-founded Flipkart in 2007, is the second blow in two months.
Bansal 'stunned' by the allegations
In a statement, Walmart said Bansal strongly denied the allegations made against him. The company told CNN Business that it first found out about the allegations in July this year.
Bansal told Flipkart employees that he was "stunned" by the allegations, according to a letter Walmart shared with CNN Business.
"While the investigation did not find evidence to corroborate the complainant's assertions against Binny, it did reveal other lapses in judgement, particularly a lack of transparency, related to how Binny responded to the situation," the company said in its statement.
"Binny has been an important part of Flipkart since co-founding the company, but recent events risked becoming a distraction," it added.
Representatives for Walmart declined to comment further on the allegations.
Bansal was CEO of the broader Flipkart Group, which includes subsidiaries such as digital payments company PhonePe and fashion retailers Myntra and Jabong. He kept that role when Walmart took over in May. Co-founder Sachin Bansal — the company's chairman at the time — chose to exit. (The two men are not related.)
Walmart said Tuesday that Binny Bansal had been "contemplating a transition for some time" and that it was accelerating a succession plan that was already in the works.
Kalyan Krishnamurthy, CEO of the group's main e-commerce business, will remain in that role but take on responsibility for the fashion retailers. PhonePe CEO Sameer Nigam and Krishnamurthy will both report directly to the Flipkart board.
"We have full confidence in the strength and depth of leadership across the company," Walmart said.
In his resignation letter to Flipkart employees, Bansal said he had been planning to stay for a few more quarters to continue the transition following the closing of the Walmart deal.
"However, my decision to step down has been accelerated by certain personal events that have taken place in the recent past," he wrote.
Bansal added that he would continue to serve on Flipkart's board and would remain a "large shareholder."
'A huge opportunity'
In an interview with CNN Business in October, Bansal spoke about Flipkart's importance to Walmart and the company's plans for the future.
"For Walmart, India was a huge opportunity which should not be missed," he said. "The future of retail obviously is e-commerce so Flipkart was a good partner of choice."
He identified sectors such as furniture, groceries and digital payments as key focus areas for the next decade.
"From a five, 10-year view ... we want to build an ecosystem around hundreds of millions of customers in India," he said. "It's a huge country, huge opportunity."
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