Bangalore: Amazon.com Inc, the world’s largest online retailer, will invest an additional $3 billion in India after the company exhausted its earlier investment pledge of $2 billion, piling pressure on local rivals Flipkart and Snapdeal to keep raising fresh funds.

Amazon’s additional investment highlights the ultra-aggressive rate at which it is spending on discounts, advertising, logistics and other things to achieve its ambition of becoming the largest e-commerce company in India. Apart from its marketplace business, Amazon will also invest in building out its web services unit in India.

Amazon chief executive officer Jeff Bezos announced the $3 billion investment plan at an event in the US attended by Prime Minister Narendra Modi.

“We’ve always maintained that India is a key geography for Amazon and we will continue to invest very aggressively and over a long term," Amazon India country head Amit Agarwal said by phone. “We’ve seen tremendous growth since our launch three years ago. Jeff captured it best when he said Amazon India has surpassed our most ambitious plans. As we’ve said before, based on the momentum we’ve seen so far and the opportunity ahead, India can be our biggest market after the US over the long term."

In July 2014, Bezos announced the company will pump in $2 billion into India over time. That announcement was seen as an open challenge to local rival Flipkart, India’s largest e-commerce firm, which had announced just one day earlier that it raised $1 billion from Tiger Global, Naspers and other investors.

Analysts and investors in India believed Amazon would take a few years to run through that money, but the company shocked the market by burning through the cash in less than two years.

Since Bezos committed $2 billion, Amazon Seller Services Pvt. Ltd (Amazon India) has already received roughly 12,080 crore from Amazon entities, documents with the Registrar of Companies show. This is apart from the company’s cash infusions into its logistics unit Amazon Transportation Services Pvt. Ltd and Cloudtail India Pvt. Ltd, Amazon’s joint venture with Catamaran Ventures.

Mint reported on 4 April that Amazon India has almost doubled its authorized capital to 16,000 crore, exceeding its massive capital commitment of $2 billion made in 2014.

Amazon launched in India only in June 2013, years after Flipkart (2007) and Snapdeal (2010). Yet, it is now neck-and-neck with its two local rivals in the ongoing race at the top of India’s e-commerce market that is expected to grow to $60 billion by 2020 from $4.48 billion in 2014, according to UBS AG. After losing out in China to Alibaba Group Holding Ltd, Amazon is desperate to succeed in the last big e-commerce market in the world.

Amazon’s additional investment plan raises the stakes for Flipkart and Snapdeal to keep raising fresh funds at a time when investors have soured on e-commerce. Mint reported on 14 April that Flipkart and Snapdeal are struggling to attract investors at their preferred valuations.

“This is a timely injection of funds by Amazon, especially considering the fact that many Indian e-commerce companies are finding it difficult to raise money," said Sreedhar Prasad, partner, e-commerce, at KPMG. “With very little differentiating the large e-tailers in India, there is a lot of scope to enhance the logistics network and fulfilment capabilities overall as well as expand to the tier 2-3 cities and rural India and gain geographic dominance in these states."

Analysts expect that investors in India’s top e-commerce firms will drive consolidation to protect their investments and better compete with the financial might and technology expertise of Amazon.

The $3 billion investment plan by Amazon comes just two months after India allowed 100% foreign direct investment in online retail of goods and services under the marketplace model. The new rules, however, prohibit marketplaces from having one dominant seller, capping the total sales of one vendor at 25%, and also ban marketplaces from influencing prices.

The new rules will affect Amazon’s discounting practices and its relationship with Cloudtail, which is the largest seller on Amazon.

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