Amazon invested another $386 million in its Indian unit

Tinuku - Amazon has invested another US$386 million in its Indian unit, bringing its total investment in India to roughly US$4 billion in the five years that it has operated in the country, even as it continues to battle against local rival and e-commerce market leader Flipkart.

Amazon, which has committed to invest at least US$5 billion in India and also separately allocated another US$500 million to build its food retail business in the country, simultaneously invested in about US$14 million into the business, Amazon Retail India Pvt Ltd.

Tinuku Amazon invested another $386 million in its Indian unit

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 US$3 billion in India after the company exhausted its earlier investment pledge of US$2 billion made in 2014. 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 CEO 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 May 22, Flipkart is likely to burn through as much as US$2 billion in cash over the next 18 months, with growth being a clear priority for India’s largest online retailer after its US$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 US$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, Amazon India chief Amit Agarwal has repeatedly indicated that the online retailer will spare no expense to claim leadership of the market. For Amazon CEO Jeff Bezos, India is the company’s most important international market and winning the market share battle in India is its top 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 Rs 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 has equally deep pockets and views Flipkart as a long-term investment.

Comments