Amazon To Invest Additional $3 Bn In India To Compete With Flipkart And Snapdeal

Amazon will invest another $3 Bn in India, in the next few years to take on rivals Flipkart and Snapdeal. This takes Amazon’s total investment in India to over $5 Bn.

Earlier in April 2016, in order to grab the largest share in the ecommerce marketplace in India, Amazon India almost doubled its authorised capital to $2.4 Bn (INR 16,000 Cr), exceeding its capital commitment of $2 Bn, committed in July 2014.

Jeff Bezos, founder and CEO of Amazon.com, said, “We have already created some 45,000 jobs in India and continue to see huge potential in the Indian economy.” He further added, “Our Amazon.in team is surpassing even our most ambitious planned milestone, and I’m pleased to announce today that we’ll invest an additional $3 Bn on top of the $2 Bn that we announced in 2014, bringing our total investment in India to over $5 Bn.”

The announcement was made by Amazon chief executive Jeff Bezos at U.S.-India Business Council’s 41st Leadership Summit in Washington, D.C. – where Amazon and its business leaders met Indian Prime Minister Narendra Modi.

The recent additional investment fuels the assumption that the ecommerce giant is spending generously on discounts, advertising, logistics, etc,  to take the top position in Indian ecommerce market.

India’s ecommerce market is expected to grow to $103 Bn by 2020, as per a report by Goldman Sachs.

Earlier this month it was reported that Amazon has fuelled approx $200 Mn (INR 1350 Cr) investment, in its Indian unit. In February 2016, Amazon invested about $300 Mn (INR 1,980 Cr.) in Amazon Seller Services, as per ROC. Earlier it infused $250 Mn (INR 1,696 Cr) through a rights issue in December 2015. The latest infusion takes Amazon’s total investment to about $1.2 Bn (INR 8,618 Cr) in Amazon Seller Services, since early 2015.

While one the other hand the Flipkart is struggling to recover from the recent markdown in stake by its investors. In May 2016, for the second time in a row and in a successive quarter, Morgan Stanley Mutual Fund Trust, lowered the value of its shares in Flipkart by 15.5%. Signifying that Morgan Stanley valued Flipkart at $9.39 Bn.

Previously in February, it had marked down Flipkart shares by 27%. Morgan Stanley’s fund had first invested in the ecommerce marketplace when it raised $160 Mn in October 2013.

This markdown pegged Flipkart’s valuation up to $10.7 Bn as compared to $15.2 Bn when it last raised capital in July 2015. This markdown was preceded by another of its investor -US-based mutual fund managed by T.Rowe Price –marking down its shares in the ecommerce giant by 15%.

While Online marketplace Snapdeal is reportedly planning to scale down operations in its regional offices including Bangalore, Mumbai, Calcutta and Hyderabad. Earlier in January 2016, Snapdeal reported a loss of INR 1,328 Cr. on revenue of INR 938 Cr. in FY 14-15.