Winners and Losers this week

This week 2 articles in my twitter feed caught my attention -
1) India's oldest microfinance firm on the verge of closure
2) Flipkart set to raise $150M from General Atlantic at $1B valuation


The first article is a truly sad reflection of the mess India's microfinance industry is in today because of poor policy, short sighted politicians as well as a lesson in why it is crucial to diverse your risk. Basix, one of India's oldest pioneering microfinance institution, is collapsing under the burden of bad loans after repayments dropped to 10% in Andhra Pradesh with the passage of the new microfinance law in that state.

The second article talks about the stratospheric valuation of Flipkart (India's Amazon). The article highlights that the company currently makes $6 million a month in revenue, but nowhere does it talk about profitability. And from the types of deals I see on Flipkart, I can't imagine their margins being that attractive either.

While I'm happy to see Indian companies getting $1B valuations, it is heart breaking to see a Basix's proven business model  fold because of a one time extreme event of bad political risk. Too bad the new RBI microfiance legislation won't be passed in time to rescue Basix.