Catamaran Ventures and Amazon India said that they will not be renewing their contract for joint venture Prione Business Services Ltd., the parent of Cloudtail India, leading to the end of its seven-year term on May 19, 2022
BENGALURU/NEW DELHI :
It’s the end of the road for Cloudtail India Pvt. Ltd, one of the largest sellers on Amazon India. The company will shut operations in May next year as parents N.R. Narayana Murthy’s Catamaran Ventures and Amazon India decided to end their seven-year-old partnership amid rising government scrutiny into operations of US e-commerce firms for alleged violations of foreign investment rules.
Catamaran Ventures and Amazon India will not renew their contract for joint venture Prione Business Services Ltd, the parent of Cloudtail India, leading to the end of its seven-year term on 19 May 2022, according to a joint statement by the two firms on Monday.
Prione, which was founded in 2014, has enabled more than 300,000 sellers and entrepreneurs to go online and enabled 4 million merchants with digital payment capabilities, according to the statement.
“Amazon and Catamaran entered into a joint venture in the early days of e-commerce in India with a shared vision of transforming hundreds of thousands of small businesses by providing online capabilities, enabling them to access customers both in India and globally. We are humbled by how the JV exceeded its vision, helping e-commerce evolve, and positively impacting more than 4.3 million small businesses, creating hundreds of thousands of jobs, and contributing to India’s digital economy," said Amit Agarwal, global senior vice president and country head, Amazon India.
India prohibits foreign direct investment (FDI) in inventory-based models for e-commerce and permits companies such as Amazon India and Flipkart to work only as marketplaces that allow businesses listed on their platforms to sell goods.
The department of industrial policy and promotion of the ministry of commerce and industry had issued Press Note No. 2 on 26 December 2018, disallowing participation of marketplaces in seller activities through any group companies. ‘Group companies’ means two or more enterprises which, directly or indirectly, exercise 26% or more of voting rights in another enterprise or appoint more than 50% of board members in the other entity.
To abide by the law, in 2019, Catamaran Ventures eventually increased its stake in Cloudtail’s parent to 76% from 51% earlier, with Amazon reducing its stake to 24% from 49% earlier.
“We are happy that Prione has leveraged global best practices for e-commerce in India, created jobs, and provided millions of Indian customers access to a wide selection of products from across the country by leveraging technology. As our JV with Amazon reaches the end of its tenure, I reflect on this successful partnership that introduced the power of digitization and empowered hundreds of thousands of SMBs across big and small towns." said M.D. Ranganath, president, Catamaran.
In January, the enforcement directorate (ED) also launched an investigation into Amazon India after receiving communication from the commerce ministry seeking “necessary action" against e-commerce companies about certain multi-brand business operations.
“Both Amazon India and Catamaran have thought it is fit to exit the JV, considering the near expiry of the term. There is no longer an anchor seller needed as e-commerce has gained popularity from various individual small sellers. Further, with the changing regulatory environment and with e-commerce operating guidelines changing, it looks like both parties have thought dissolving the entity is the best route," said an individual, aware of the discussions, who spoke on condition of anonymity.