AMAZON DOUBLES INDIA WAR CHEST
Increases authorised capital to $4.74 bn; raises stakes in battle with Flipkart
Amazon India has nearly doubled its authorised capital to ₹31,000 crore ($4.74 billion), nearly matching its mammoth capital commitment of $5 billion made in June last year. Not only does it improve the prospect of further investment commitments from founder and CEO Jeff Bezos, it also sets the stage for an all-out war against local rival Flipkart.
BENGALURU: Amazon India has nearly doubled its authorised capital to ₹31,000 crore ($4.74 billion), nearly matching its mammoth capital commitment of $5 billion made in June last year.
Not only does it improve the prospect of further investment commitments from founder and CEO Jeff Bezos, it also sets the stage for an all-out, high-stakes war against local e-commerce rival Flipkart.
According to regulatory filings with the Registrar of Companies on Tuesday, Amazon India has already issued paid up capital of ₹17,839 crore ($2.7 billion) towards its marketplace arm Amazon Seller Services — far exceeding its initial commitment of $2 billion made in July 2014.
The latest move by Amazon indicate that the American e-commerce giant is more than willing to not just match, but outweigh the war chest commandeered by rival Flipkart in the battle for what is widely seen as the world’s last major consumer Internet economy.
“As India’s largest and fastest growing e-commerce player, and with a long-term commitment to make e-commerce a habit for Indian customers, we continue to invest in the necessary technology and infrastructure to grow the entire ecosystem. We are delighted and humbled by the trust from our customers, to lead in India on things that matter to our customers in over four years of our business, while continuing to launch innovative India-first initiatives as well as completely new offerings like Echo, Prime and Prime Video,” said an Amazon India spokeswoman in response to a query from Mint.
Flipkart, which is also extremely well funded and counts among its investors Japan’s SoftBank Group Corp, China’s Tencent Holdings Ltd, South Africa’s Naspers Ltd and Accel Partners, among others, has already raised nearly $3 billion in two separate tranches this year and has declared that it has at least $4 billion of cash reserves.
Flipkart did not immediately respond an email seeking comment.
Amazon’s willingness to pump in more funds is significant at this point, because it comes after a bruising festive season battle against Flipkart where it lost out to the Indian online retailer, as Mint reported on September 27. The company also lags Flipkart in terms of overall gross sales.
To be sure, Amazon has disputed the claim that it lags Flipkart and has asserted that its methodology of calculating gross sales could be different from that deployed by Flipkart. Gross sales refers to the value of goods sold on a platform, not net revenue.
In recent interviews, Amazon India chief Amit Agarwal has indicated that the online retailer has a multi-year, multi-billion dollar view as far as India is concerned. “I think our investments are still squarely in the same three areas—how do we add more selection, how do we make it easier for sellers to offer more competitive prices and how do we build for faster deliveries...A layer on top of that is that we keep investing in Prime—so video, music, Echo, etc, are our key areas,” said Agarwal in an October 27 interview.
Mint reported in April 2016 that Amazon India, which was launched in June 2013, had doubled its authorized capital to roughly about ₹16,000 crore. Since then, Amazon has invested twice in its Indian marketplace— a ₹2,010 crore infusion in December last year and another ₹1,680crore investment in June.
The pace at which Amazon has raised the stakes in India to fight Flipkart has been staggering. In July 2014 Amazon’s authorised capital was only ₹1,500 crore, when Bezos made the initial $2-billion commitment. In June 2016, Amazon committed another $3 billion. Amazon has nearly caught up with Flipkart in its four years of operations in India.
“As of now, the battle between Flipkart and Amazon is too close to call. I don’t think is Flipkart is going to lose out in the near future, unless they make big strategic blunders, which is highly unlikely,” said Harminder Sahni, founder and MD of consulting firm Wazir Advisors. “Having said that, Amazon should be happy with what they’ve achieved so far.”