Amazon to Invest Over Rs 4,400 Crore in its India Business.

In the fiscal year 2018-2019, Amazon, battling against Flipkart, suffered a cumulative loss of over Rs 7,000 crore across its various units. However, Amazon’s step to increase its funding is indicative of company’s confidence in the Indian market, which is expected to grow manifold in the coming years.

Amazon is an American multinational technology company, which is considered as one of the Big Four technology companies, along with Google, Apple, and Facebook. The company focuses on e-commerce, cloud computing, digital streaming, and artificial intelligence.

According to the regulatory filings submitted to the Corporate Affairs Ministry, two of Amazon’s entities, Amazon Corporate Holdings and Amazon.com Inc Ltd are pumping in Rs 3,400 crore in Amazon Seller Services, Rs 900 crore in Amazon Pay (India), and Rs 172.5 crore in Amazon Retail India, which are the company’s marketplace unit, payments arm and food retail business respectively. The resolutions have been approved by their respective boards by October 17, 2019.

In India, the proliferation of the internet and smartphones is a significant factor driving the growth of the e-commerce market. Moreover, the Indian government, through its Digital India initiative, has taken a step towards transforming India into a cashless digital economy. India, having one of the largest youth populations globally, provides ample opportunities for various e-commerce companies to grow.

While Amazon Seller Services, the company’s online marketplace arm, managed to narrow its loss to Rs 5,685 crore with the growth in its revenue by 55% in 2018-19 over the previous fiscal, Amazon Pay India, its payments arm, registered a manifold rise in losses, widening to Rs 1,160.8 crore in 2019 from Rs 334.2 crore in 2018 due to a strong competition from players like Paytm, Flipkart’s PhonePe, and Google Pay. For 2018-19, Amazon Pay’s revenues doubled to around Rs 834.5 crore over the previous fiscal.

Amazon Retail India recorded a loss of Rs 127.4 crore with a revenue of Rs 139 crore in 2019. The unit, according to its regulatory filing, has built sourcing and delivery capabilities for diversified food products such as dry groceries, fruits, vegetables, protein foods, packaged foods, dairy, and other frozen products. Further, the company, with a view to set up a sorting, grading, and packing centre for fruits and vegetables, has identified a location for setting up a collection centre to support this facility, enabling it to source fruits and vegetables directly from farmers and local markets. Thus, the company is investing in building technological capabilities to source produce and perishables on a large scale.

Amazon and its rival, Flipkart, have been busy investing millions of dollars across various operations like marketplace, infrastructure, and supply chain management, along with marketing and promotion, as they aim to strengthen their position in the Indian e-commerce market. It has been estimated that e-commerce accounts for less than 5% of India’s retail market, but it is expected to grow rapidly as more and more Indians come online to shop. Earlier in 2016, Amazon founder Jeff Bezos had committed an investment worth of USD 5 billion into the Indian market due to the growth prospects in the region.