Indian School of Business cracks whip, threatens start-ups with ban; here’s why

After the IITs and the IIMs, the Indian School of Business (ISB) is the next to talk tough to e-tail/e-commerce companies that are not meeting their commitments to students.
By: Priyanka Ghosh | Updated: June 7, 2016 4:58 PM

After the IITs and the IIMs, the Indian School of Business (ISB) is the next to talk tough to e-tail/e-commerce companies that are not meeting their commitments to students.

After a clutch of e-commerce firms including, Stayzilla, Hopscotch, Ivis International, Babajob and Nearbuy (formerly Groupon) delayed the induction of at least 50 students from ISB, the business school’s director of career advancement services, Uday Virmani sent an email to the class of 2016, saying such firms will be blacklisted for at least a year and will need to pay students as well.

Virmani’s letter, reviewed by FE, talks of a “number of instances of offers being revoked this year coupled with a few glaring unfair practices during interviews… across Business & Tech Schools”. Based on this, ISB has proposed to put in new recruiter policies.

These include “recruiters must honour the offer commitment made on campus,” paying three months’ gross salary if there is any “delay in the date of joining (DoJ) beyond June 30 of the graduating year” or “downward revision of CTC.”

If recruiters are not able to absorb a student, they “need to pay 6 months’ gross salary (fixed pay)”. And “recruiters not honouring the offer commitment will be banned for a minimum of one year or until the placement committee of the school decides on having them for placements in conjunction with Student — Career Advancement Council”, the new recruiter policies state.

Any e-commerce/start-up firm coming to the campus for placement will have to agree to these terms first. Meanwhile, ISB has assured its continued support to students whose date of joining has got delayed or their letters revoked.

When contacted by FE, Virwani said that these new policies are under review at the moment for the class of 2017.

At ISB, one student who had accepted a job offer from hotel and home stay aggregator, Stayzilla told FE he was offered a package of more than `50 lakh, including stock options. The student, who did not wished to be named, said the company deferred the joining date from May to December. Stayzilla, he told FE, did not give a reason for the delay.

Industry sources said marketplace major, Snapdeal too has deferred its date of joining from May to July, stating the company is going through a process of restructuring. But its offers are still active. Snapdeal, however, told FE that it did not defer the dates of joining and that this was always going to be the month of July, right from the time the initial offers were made.

Industry watchers said it was possible Stayzilla had been expecting an infusion of funds that had probably been delayed. Nearbuy, which rescheduled offers it made to students from May to October, is believed to have said the deferment is owing to “internal restructuring for strategy resources”. Responding to FE’s emailed query, Nearbuy said that of the four positions offered, two had to be kept on hold because the roles were through internal change. Hopscotch and Stayzilla also did not respond to FE’s mail.

“There is no doubt that in the e-commerce sector, valuations have gone ahead of value creation and companies have to first make their business models sustainable,” said TV Mohandas Pai, former board member and director of HR at Infosys.

Although Virmani said the offers were deferred due to the volatility the e-commerce sector is currently undergoing, he reiterated that students of 2017 will be encouraged to be emphasize due diligence and pay specific attention to companies’ financial hygiene.

With valuations being marked down dramatically, new funding hard to come by and investors coming down on companies for excessive cash burn — that, in turn, is slowing sales — cutting back on hiring is one of the few options left for these firms.

In the case of Flipkart, for instance, the valuation is down to $9.3 billion compared with $15 billion in June 2015, when Tiger Global invested $700 million in it. In February 2016, Morgan Stanley marked down its investment in Flipkart by 27% and then, by just a little under 16% last month.

While HR consulting firm, GlobalHunt’s managing partner, Sunil Goel said he was seeing an increasing number of instances wherein companies are not able to honour their commitments,

Pai points out that periods of attrition naturally follow exuberance. “These are volatile times, not unique to the sector, it has happened twice in the IT industry,” he added.

A June report published by India Ratings said those e-retailers that were flush with private equity funds up until 2015 have had lesser fortune this year. According to Sony Joy, CEO at Chillr, it has become tougher to attract late-stage capital since last year as investors are turning more risk averse. Joy, though, feels that there is an upside since those still looking for jobs will now demand more reasonable salaries. That, of course, depends on whether start-ups will even be allowed into the campuses of leading business and engineering schools.