Amazon India Doubles Authorised Capital To $2.4 Bn

In order to grab the largest share in the ecommerce marketplace in India, Amazon India has almost doubled its authorised capital to $2.4 Bn (INR 16,000 Cr), exceeding its capital commitment of $2 Bn (about INR 13,000), that it committed in July 2014, reports Livemint.

Authorised capital is the maximum amount of capital which a company can raise through sale of its shares, allowing the company to issue stock to raise capital when it needs funds.

Amazon’s Indian flagship firm Amazon Seller Services’ authorised capital was $226 Mn (INR 1,500 Cr) in July 2014, as per the Registrar of Companies’ filings. This was around the time when Jeff Bezos promised to invest $2 Bn in its Indian operations for the infrastructure, new fulfillment centres, customer acquisition, new product categories, payments, SMEs, and mobile.

The report also states that since the $2 Bn commitment from Bezos, Amazon Seller Services has been infused with about $1.6 Bn (INR 10,730 Cr) to spend on discounts, advertising, hiring and other things. This investment is separate from Amazon’s investment in its logistics unit Amazon Transportation Services Pvt. Ltd and Cloudtail India Pvt. Ltd (Amazon’s joint venture with Catamaran Ventures).

An email sent to Amazon India regarding the latest capital infusion did not elicit any response.

Amazon has been investing heavily in India to overtake its local rivals Flipkart and Snapdeal. 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.

Last week, Department of Industrial Policy and Promotion (DIPP) shared the guidelines on FDI in ecommerce, permitting 100% FDI in Business to Customers (B2C) in marketplace model.

In addition, it also explicitly specified two key announcements on limiting discounting and capping sales from one vendor. These two guidelines were:

An ecommerce entity will not permit more than 25% of the sales affected through its marketplace from one vendor or their group companies
Ecommerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field

The first rule will definitely trouble Amazon as Cloudtail India Pvt. Ltd, the biggest seller on Amazon India, contributes at least 40% of the company’s sales.

Last year, according to publicly available data and several company executives, Amazon gained significant market share at the expense of Flipkart and Snapdeal. But these new regulations imply that Amazon India may have to find new seller entities on their platform.

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