Amazon’s India arm is probably getting more money soon. The first signs of that fresh burst of capital came in as the company doubled its authorized capital to around ₹16,000 crore.
According to documents unearthed by Mint, this new authorized capital has even exceeded the $2 billion which Jeff Bezos had committed to invest in Indian operations. This clearly indicates that Amazon is ready to infuse as much cash as possible, to be at the pole position in India.
The authorized capital is the maximum amount of share capital that is allowed by the company’s charter. When Jeff Bezos promised that Amazon will invest $2 billion in India over the next few years, the company’s authorized capital was Rs. 1,500 crore, in 2014.
After $2 billion capital commitment from the company’s founder, Amazon Seller Services has already received around Rs.10,730 crore in multiple tranches.
The amount is being used by the company on discounts, advertising, hiring, etc., as per the documents with the RoC. This is apart from the company’s cash infusions in its logistics unit Amazon Transportation Services Pvt. Ltd and Cloudtail India Pvt. Ltd, which is the company’s joint venture with Catamaran Ventures.
Amazon is competing against homegrown companies in this market – Flipkart and Snapdeal. However, it seems that the Amazon is slowly winning the race as latest reports suggests that both the companies – Flipkart and Snapdeal are struggling to raise new funding round — a must for them to even continue operating.
Earlier, it was reported that Flipkart is in talks with Alibaba, the largest eCommerce platform of China, for an investment of $1.4 billion in its upcoming funding round. However, nothing has been confirmed yet.
Amazon is also expanding into other businesses. Amazon India recently launched grocery deliveries in Bengaluru through a dedicated app called Amazon Now, which promises to deliver household products in less than two hours.
But, during the same time period, Flipkart shut down its groceries delivery app Nearby as it failed to generate enough interest among shoppers. It was also launched in Bangalore region as a pilot project.
Recently, Government of India allowed 100% Foreign Direct Investment (FDI) in the eCommerce marketplace model. But, at the same time, it has restricted them to give heavy discounts to customers.
It also states that no group company or seller on a marketplace can contribute more than 25% of the sales generated on the site. This may prove to be difficult to deal for the e-commerce giants such as Amazon and Flipkart which are selling on their platform through Cloudtail and WS Retail, respectively.