US online retail giant Amazon has invested fresh capital of Rs 2,600 crore into its India business unit, Amazon Seller Services, to beef up its war-chest against domestic rival and Indian e-commerce market leader Flipkart, as per media reports.
The development comes amid the Flipkart-Walmart deal that was sealed on 9 May with global retail giant announcing that it was buying 77 percent equity stake in the country’s largest e-tailer for $16 billion.
According to filings to Corporate Affairs Ministry, Amazon Corporate Holdings and Amazon.com.inc has made the Rs 2,600 crore investment in the Indian marketplace unit. The board of directors of Amazon Seller Services passed the resolution at their meeting on April 26, 2018, it added.
ALSO READ: Walmart Buys 77% Equity Stake in Flipkart for $16 Bn
In January this year, Amazon Seller Services had received a fund infusion of Rs 1,950 crore from the parent company.
When contacted, Amazon India spokesperson said,
“As India’s fastest growing e-commerce player 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”.
The company has been launching innovative India-first initiatives as well as completely new offerings like Echo, Prime, Prime Video and Prime Music, the spokesperson added.
The fresh funds will provide more arsenal to Amazon.in, which has been aggressively investing in expanding infrastructure and adding solutions to enhance consumer and seller experience.
Amazon founder Jeff Bezos has committed investments to the tune of USD 5 billion for the Indian market.
During a recent investor call, Amazon CFO Brian Olsavsky had said the company would continue to invest in India as it sees great progress with both sellers and customers here, even though as the US e-tailing giant had registered a loss of USD 622 million from international operations in the first quarter of 2018.
The American company has also been pumping funds into its other entities in India, including Amazon Pay and wholesale business. These investments have been used in building warehouses, strengthening logistics and increasing product assortment.
Amazon is also investing significant money in marketing and promotions as the company is working towards bringing in more customers to its online shopping platform.
Flipkart-Walmart deal has upped the ante for Amazon in India
It is not a secret that the deal signed between Flipkart and Walmart is to drive Amazon at bay.
Walmart is the world’s largest traditional retailer, but Amazon has proved a stiff competition as consumers increasingly migrate to online retail.
India is the next big potential prize after the US and China. Foreign investors have not made much progress against the Alibaba Group Holding Ltd. in the country. The market here is not that cutthroat and Walmart has several new strategies up its sleeves to woo customers in India.
Recently, Amazon, too, made a formal offer to buy a 60 percent stake in Indian online retailer Flipkart. It had also offered Flipkart a breakup fee of $2 billion. A breakup fee is a penalty set during the process of takeover agreements, to be paid if the target backs out of the deal.
Amazon’s potential willingness to pay for Flipkart might have been because it had thought that a combined Amazon and Flipkart would lead to a less competitive or more rational environment going forward. It would have also enabled Amazon to scale its budding logistics network faster and more profitably.
But, with all those plans going haywire, Amazon has now decided to strengthen its war-chest and brace up for the battle in the Indian e-commerce sector.
ALSO READ: Why Are Walmart And Amazon Battling To Buy Flipkart?
