Amazon invests another Rs 2,700 crore in India business
This brings its total investment in India to $4 billion in its five years of its operation, even as it continues to battle against Flipkart
Bengaluru: Amazon, the world’s largest online retailer, has invested an additional ₹2,700 crore ($386 million) in its Indian unit, bringing its total investment in India to roughly $4 billion in the five years that it has operated in the country, even as it continues to battle local rival and market leader Flipkart.
Amazon, which has committed to invest at least $5 billion in India and also separately allocated an additional $500 million to build out its food retail business in India, simultaneously pumped in about ₹100 crore ($14 million) into the business (Amazon Retail India Pvt. Ltd).
Amazon Seller Services, the marketplace arm of Amazon India, received the funds earlier this month, according to regulatory documents filed with the Registrar of Companies that were sourced from Paper.VC. So far, Amazon has been spending all its cash on building massive warehouses, a large logistics unit, marketing, discounts and increasing product assortment.
In June 2016, Amazon had said it would invest an additional $3 billion in India after the company exhausted its earlier investment pledge of $2 billion made in 2014. Amazon is currently the No. 2 player in India’s online retail market.
The latest investment from Amazon does not come as a surprise, given that the online retailer is going all-out in its attempts to overtake Flipkart, which has stubbornly held on to its lead under chief executive officer Kalyan Krishnamurthy.
Both Amazon and Flipkart are expected to spend hundreds of millions of dollars towards expansion over the next few years. For both companies, sales growth is a much bigger priority than cutting losses and analysts say that they are nowhere near profitability.
On 22 May, Mint reported that Flipkart is likely to burn through as much as $2 billion in cash over the next 18 months, with growth being a clear priority for India’s largest online retailer after its $16-billion takeover by Walmart in May. Flipkart, which owns fashion retailers Myntra and Jabong and the mobile payment app PhonePe, currently has a burn rate of $70-80 million per month. Since it started out in 2007, and prior to its takeover by Walmart, Flipkart has raised over $6 billion in funds from a wide range of the world’s biggest investors such as Tiger Global Management and Japan’s SoftBank.
In recent interviews with Mint, Amazon India chief Amit Agarwal has repeatedly indicated that the online retailer will spare no expense and invest as much as necessary to conquer India. For Amazon CEO Jeff Bezos, India is the company’s most important international market and winning the market share battle in India is its topmost priority, after Amazon lost out to Alibaba in China.
That commitment towards investing in India clearly shows in its regulatory filings over the past few years.
Amazon’s authorized capital was just ₹1,500 crore in July 2014, when Bezos made the $2-billion commitment. Amazon’s authorized capital currently is well over 10 times that amount.
For Amazon, it will have to keep up its aggressive pace of investments in India in the near term, given that it is now up against Walmart, which boasts of equally deep pockets and views Flipkart as a long-term investment.
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