Ama­zon dou­bles its war chest to take on Flip­kart


Au­tho­rized cap­i­tal in­creased to $4.74 bn, rais­ing the stakes in the bat­tle with Flip­kart

Ama­zon In­dia has nearly dou­bled its au­tho­rized cap­i­tal to Rs31,000 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 chief ex­ec­u­tive Jeff Be­zos, it also sets the stage for an all-out, high­stakes 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 Rs17,839 crore ($2.7 bil­lion) to­wards its mar­ket­place arm Ama­zon Seller Ser­vices—far ex­ceed­ing its ini­tial com­mit­ment of $2 bil­lion in July 2014.

The lat­est move by Ama­zon in­di­cates that the Amer­i­can e-com­merce gi­ant is more than will­ing to not just match, but out­weigh the war chest com­man­deered by Flip­kart in the bat­tle for what is widely seen as the world’s last ma­jor con­sumer In­ter­net mar­ket.

“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 The lat­est move by Ama­zon in­di­cates that the Amer­i­can e-com­merce gi­ant is more than will­ing to not just match, but out­weigh the war chest com­man­deered by lo­cal ri­val Flip­kart, which has de­clared that it has at least $4 bil­lion of cash re­serves. 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,” an Ama­zon In­dia spokes­woman said 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, 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 es­pe­cially 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 27 Septem­ber. 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,” Agar­wal said in a 27 Oc­to­ber in­ter­view.

Mint re­ported in April 2016 that Ama­zon In­dia, launched in June 2013, had dou­bled its au­tho­rized cap­i­tal to roughly about Rs16,000 crore. Since then, Ama­zon has in­vested twice in its In­dian mar­ket­place—a Rs2,010 crore in­fu­sion in De­cem­ber last year and an­other Rs1,680 crore 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 au­tho­rized cap­i­tal was only Rs1,500 crore, when Be­zos made the ini­tial $2 bil­lion com­mit­ment. In June 2016, Ama­zon com­mit­ted a fur­ther $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 man­ag­ing di­rec­tor of con­sult­ing firm Wazir Ad­vi­sors. “Hav­ing said that, Ama­zon should be happy with what they’ve achieved so far. They have al­ready re­al­ized that In­dia is not a win­ner-takes-all mar­ket and that there’s enough room for two big play­ers to com­pete.”

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