2 min read.Updated: 24 Nov 2014, 05:02 PM ISTMihir Dalal
Move indicate that company's US parent will continue to invest aggressively in India and is unlikely to be deterred by pressure from investors to cut spending
Bengaluru:Amazon India has more than doubled its authorized share capital to ₹ 3,500 crore in November, indicating that the company’s US parent will continue to invest aggressively in India and is unlikely to be deterred by the pressure from its investors to cut spending.
Shareholders are piling pressure on Jeff Bezos, chief executive of Amazon.com Inc., to rein in spending on new businesses after several quarters of earnings that had disappointed investors. Some investors in local rivals Flipkart and Snapdeal had expected that the shareholder criticism may lead to more controlled investments by Amazon.com in India.
However, Amazon Seller Services Pvt. Ltd, the Indian unit of the world’s largest online retailer, increased its authorized capital earlier this month, according to documents with the Registrar of Companies. The company had increased its capital to ₹ 1,500 crore from ₹ 200 crore less than a year ago.
The authorized capital of a company is the maximum amount of share capital that is allowed by the company’s charter and can be changed with shareholders’ approval. Typically, a greater number of shares are authorized than required, allowing the company to issue stock to raise capital when it needs funds.
Amazon India also named its payments head Srinivas Rao as a director on its board in October, the documents cited above show.
Amazon India is launching new marketing campaigns, setting up seller entities through a joint venture and scouting for deals to accelerate sales growth. The company is also building a large supply chain and logistics network as it tries to offer the fastest and most consistent delivery service to differentiate itself from rivals.
Since launching its India platform in June 2013, Amazon has been spending heavily on advertising and funding deep discounts for customers to emerge as the biggest threat to local rivals Flipkart and Snapdeal.
“It’s clear that the battle is on between the three (Amazon, Flipkart and Snapdeal) and anyone expecting Amazon to become less aggressive is in denial," said Harminder Sahni, managing director at consultancy Wazir Advisors. “This is a very high-stakes battle and from the spending patterns, it looks like Amazon is probably the most aggressive right now among the three."
In July, Bezos promised Amazon would invest as much as $2 billion in India over the next few years. Bezos even visited India for five days in October to encourage Amazon India executives to build on their impressive launch and meet with business partners and politicians, including Prime Minister Narendra Modi.
It’s important for Amazon to establish a large business in the country after having lost out to Alibaba in China, which overtook the US last year to become the largest e-commerce market in the world. India is one of the last of the potentially large e-commerce markets in the world.
Amazon needs to spend heavily in India as rivals Flipkart and Snapdeal have amassed large war chests of their own. A day before Bezos promised to invest $2 billion in India, market leader Flipkart announced it received $1 billion in fresh funds from investors such as Tiger Global Management and Naspers, a landmark for India’s fledgling but fast-growing e-commerce sector. In late October, Snapdeal raised $627 million from Japan’s SoftBank, which is also the biggest investor in China’s Alibaba.
Amazon India posted a 50.2% jump in sales to ₹ 168.9 crore for the year ended 31 March, while its loss widened to ₹ 321.3 crore from ₹ 24.6 crore in the previous year, reflecting the heavy investment in marketing, discounts and supply chain that has enabled the fast revenue growth at the company, Mint reported on 3 November.
Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.
Never miss a story! Stay connected and informed with Mint.
our App Now!!