SUMMARY
The Development Comes Two Months After Amazon India Doubled Its Authorised Capital To $4.7 Bn
To outrun homegrown rival Flipkart, ecommerce giant Amazon has infused $306 Mn (INR 1,950 Cr) funding in its Indian arm, Amazon Seller Services. As per the company’s regulatory filings, the investment was made by Seattle-headquartered Amazon Inc and its Singapore-based subsidiary, Amazon Corporate Holdings.
With this, the overall capital infusion in Amazon Seller Services has touched $1.3 Bn (INR 8,150 Cr) for FY18.
Commenting on the fundraise, Amazon India said in an official statement “We remain committed to our India business with a long-term perspective to make e-commerce a habit for Indian customers and 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 e-commerce in India”
The development comes just over two months after the company fueled $446 Mn (INR 2,900 Cr) in its India operations, making it the biggest capital infusion in Amazon India till date. As part of the round, the online marketplace almost doubled its authorised capital to $4.74 Bn (INR 31,000 Cr), matching its earlier capital commitment of $5 Bn.
Since the launch of its India operations in June 2013, the Jeff Bezos-led online marketplace has pumped more than $3 Bn (INR 19,790 Cr) into Amazon Seller Services. In fact, the latest financing is the fourth in a series of investments made by the US-based parent entity in its Indian unit over the last one year.
An email query sent to Amazon did not elicit a response till the time of publication.
Earlier this month, Amazon claimed the top spot during the Republic Day sale battle, overtaking homegrown ecommerce unicorn Flipkart by a significant margin. Amazon India held its Great Indian Sale from January 20 to 24, with a 12-hour early access for Prime members on January 20. Flipkart, on the other hand, held its Republic Day sale from January 21 to 23.
Amazon Continues To Be Bullish On Indian Market
Over the last few years, Amazon has been doubling down to capture the Indian market through almost continuous capital infusion. For instance, in the quarter ending on September 30, 2017, the ecommerce giant reported a loss of $936 Mn in the international markets, owing to its aggressive investments in India.
However, as iterated by Amazon Worldwide Consumer CEO Jeff Wilke, India is currently the company’s the fastest growing market. He had stated in an earlier media interaction, “One of our leadership principles is customer obsession, and we don’t spend time thinking about competitors. We promised in 2014 that we will invest $2 Bn (in the India business) and then in 2016, another $3 Bn. We are on track to invest all that money. We are investing because we like the return that we are seeing in terms of growth and we like the inventions on behalf of sellers and customers.”
Keeping with the company’s commitment to its Indian business, Amazon India reported over 105% growth in revenue in FY17. As per its regulatory filings, Amazon Seller Services posted a 41% increase in earnings to $485.4 Mn (INR 3,128 Cr) during the said period.
With over 250K registered sellers on its platform, it currently earns through commissions, advertisements and shipping fees. Additionally, it generates revenue from its Seattle-headquartered parent by way of advertising fees, royalty on sales of the parent entity’s in-house brands like Kindle and other transactions.
As Amazon races to beat Flipkart in the Indian market, however, the online marketplace has also witnessed a significant increase in its cash burn.
As per reports, Amazon India’s monthly spending stands at $120 Mn, of which ecommerce accounts for $75 Mn. The remaining $45 Mn going into the company’s subscription service, Prime. This is a substantial jump from its earlier cash burn rate of $80 Mn-$100 Mn per month back in 2016.
Flipkart, on the other hand, made headlines last August when it raised massive investment of $2 Bn-$2.5 Bn from SoftBank Vision Fund. The investment was part of an earlier $1.4 Bn round from Tencent, eBay and Microsoft, which took place in April 2017 at a post-transaction valuation of $11.6 Bn.
Over the last few months, the homegrown ecommerce unicorn has been proactively pumping fresh funds into its subsidiaries: fintech firm PhonePe and logistics startup, Ekart. In October 2017, for instance, it fueled a massive $460 Mn funding in Ekart.
Within days, Flipkart announced an investment of $500 Mn in its group company, the UPI app PhonePe. The financing came a month after the Sachin Bansal and Binny Bansal-founded company poured $38.7 Mn in the digital payments subsidiary.
To tackle a formidable rival like Flipkart, Amazon is doubling down on its efforts to diversify its business. On the one hand, it is getting ready to enter the online food retail and grocery market. While on the other hand, it is eyeing a piece of the Indian digital payments pie with Amazon Pay. The latest $306 Mn funding, therefore, indicates that the company is more than willing to match or outnumber Flipkart’s funding war chest to take it head on in India, one of world’s last major consumer Internet market.
(The development was first reported by ET)
