Amazon invests Rs 2,800 crore in Indian arm after shutting down operations in China
BusinessToday.In June 7, 2019
Jeff Bezos led ecommerce giant Amazon has made a fresh investment of Rs 2,800 crore in its India unit, Amazon Seller Services, the first tranche of capital infusion in this calendar year. This reportedly takes the total funding received from the US-based parent to around Rs 30,090 crore, closer to the $5 billion (over Rs 35,000 crore) kitty that Bezos had committed for the Indian market in 2016.
The fresh investment will beef up Amazon's war-chest to take on Indian e-commerce market leader Flipkart, which was acquired by Walmart last year. Significantly, the latest infusion not only comes barely six months after the previous tranche of Rs 2,200 crore, but is also the first one since Amazon's April announcement about shutting down its Chinese marketplace by mid-July.
Amazon India allotted 2.8 billion equity shares of Rs 10 each aggregating to Rs 2,800 crore at par on rights basis to the existing shareholders of the company, according to a regulatory filing by Amazon, the Business Standard reported citing documents sourced from business intelligence platform Paper.vc. The resolution for this capital infusion was passed by the board of directors of Amazon Seller Services on May 21.
Amazon, which took a hit from India's recently modified foreign direct investment (FDI) rules for the e-commerce sector, is clearly looking to makeup for the downtime with this fresh investment. The revised norms announced in December bar online retailers from selling products via vendors in which they have an equity interest, and also from making deals with sellers to sell exclusively on their platforms. Vendors are also no longer allowed to have more than 25 per cent of their revenues coming from a single platform.
So ahead of the new norms kicking in from February 1, products from sellers like Cloudtail and Appario - that have equity investment from Amazon - were taken off from Amazon.in's platform. Similarly, clothing from domestic department store chain Shopper's Stop was also removed since Amazon owns 5 per cent of the company. It also had to temporarily suspend its Amazon Pantry service.
The latter is now back to rapid expansion mode, as Amazon.in bets big on the grocery category to drive growth in business. Late last month the company announced that its Pantry service now boasts a footprint in over 110 cities from just 40 cities in November 2018. Amazon has committed $500 million to its food retail venture amid growing competition in the e-grocery space. Amazon's arch rival, Flipkart, is also strengthening its presence in this segment.
With the Indian ecommerce market projected to grow to $200 billion by 2026 from $38.5 billion in 2017, neither player can afford to drop the ball at this time. Moreover, according to India Brand Equity Foundation, a Trust established by the Ministry of Commerce and Industry, India's ecommerce revenue is expected to jump to $120 billion in 2020, up from $39 billion in 2017, growing at an annual rate of 51 per cent, the highest in the world.
Sushmita Choudhury Agarwal with agency inputs