The US-based ecommerce giant Amazon is pumping over Rs 4,400 crore (more than $600 million) in its various units in India, including marketplace and food retail, to provide them more ammunition to compete against arch-rival Flipkart.
Amazon, which is locked in a battle against Flipkart, had registered cumulative losses of over Rs 7,000 crore across various units in FY19. However, the fresh funding is indicative of Amazon's confidence in the Indian market.
As per its regulatory filings with the Corporate Affairs Ministry, two of the company's entities, Amazon Corporate Holdings and Amazon.com.incs Ltd, are pumping Rs 3,400 crore into marketplace unit Amazon Seller Services, Rs 900 crore into payments arm Amazon Pay (India), and Rs 172.5 crore into food retail business Amazon Retail India. A filing, sourced by Paper.vc stated,
“...consent of the board be and is hereby accorded for allotment of 3,400,000,000 (340 crore) equity shares of Rs 10 each aggregating to Rs 3,400 crore to the existing shareholder on right basis...”
The resolution was passed by the board of directors of Amazon Seller Services on October 14, 2019, it added.
Separate resolutions for allotment of 17.25 crore equity shares of Amazon Retail India, aggregating to Rs 172.5 crore, and 90 crore equity shares of Amazon Pay (India), totalling Rs 900 crore, to Amazon Corporate Holdings and Amazon.com.incs Ltd were approved by the respective boards on October 17, 2019.
An Amazon India spokesperson declined to comment on the fund infusion.
Amazon Founder Jeff Bezos had committed investment worth $5 billion in the Indian market in 2016. Just as rival Flipkart, the US-based platform has also been pumping in millions of dollars across various operations such as marketplace, infrastructure, and supply chain management as well as marketing and promotion, as the giants look to strengthen their position in the Indian ecommerce market.
Estimates suggest that ecommerce accounts for under five percent of India's retail market but is expected to grow manifold as more and more Indians move to online shopping.
However, this rapid scaling up has not come cheap. According to regulatory documents, Amazon's losses in India across its marketplace and a few other entities in FY19 were over Rs 7,000 crore.
Amazon Seller Services, the online marketplace arm of the ecommerce giant in India, managed to narrow its loss to Rs 5,685 crore, while its revenues grew 55 percent over the previous fiscal to Rs 7,778 crore in FY19.
However, Amazon Pay India, its payments arm that competes with the likes of Paytm, Flipkart's PhonePe, and Google Pay, recorded a manifold rise in losses. Its loss widened to Rs 1,160.8 crore in FY19 from Rs 334.2 crore in FY18.
The unit's revenues for FY19 more than doubled to Rs 834.5 crore over the previous fiscal.
Amazon Retail India posted a loss of Rs 127.4 crore and revenue of Rs 139 crore in FY19. On March 2019, it was available for customers in 125 cities, and it had leased out about one lakh sq ft of storage space.
“We have built sourcing and delivery capabilities for food as varied as dry grocery, packaged foods, fruits, vegetables, protein foods, dairy, and other frozen products. We are gearing up for setting up a sorting, grading, and packing centre for fruits and vegetables,” the Amazon Retail India regulatory filing stated.
It added that the company has also identified a location for setting up a collection centre to support this facility that would enable sourcing of fruits and vegetables directly from farmers and local mandis. It further noted,
“We are investing to build technological capabilities to source produce and perishables at scale. As of March 2019, we generated a revenue of Rs 1,390 million (Rs 139 crore).”
(Edited by Athirupa Geetha Manichandar)