Amazon sold its stake in Cloudtail, an Indian online retailer, to comply with new eCommerce rules in the country.
According to a report in Bloomberg, Amazon put together a quick deal to sell the stake so that Cloudtail could resume selling products on its platform. People familiar with the matter told Bloomberg that thousands of product listings in India were suspended before the move on Amazon’s part.
Amazon was reacting to new rules put on the books by the Indian government led by Prime Minister Narendra Modi. With a general election slated for May, Modi wanted to win favor with merchants who view Amazon and Walmart as a direct threat. Under the new eCommerce rules, foreign companies can’t own a majority stake in a merchant that sells products on its platform, and can’t ink exclusive deals with manufacturers and brands. The listings have been frozen since the eCommerce rules went into effect at the beginning of the month.
Under the hastily arranged deal, Amazon sold 25 percent of its shares in Cloudtail to Prione Business Services, which now owns 76 percent of the venture, up from 51 percent. The remaining 24 percent is owned by Amazon Asia-Pacific Resources, a non-Indian unit of Amazon, reported Bloomberg.
Despite the deal, which enables Cloudtail to return to the Amazon marketplace in India, thousands of products are no longer online at Amazon or Flipkart, the Walmart-owned eCommerce operator. Combined, the two control 70 percent of the market share online. The new rules could cut revenue growth nearly in half, according to Arvind Singhal of consultancy Technopak Advisors Pvt.
At the same time that Amazon is bringing thousands of products back online, its Amazon Pantry grocery service has also reopened in India. Amazon Retail India Pvt. Ltd. was found to be compliant with the laws in India, given that the country is allowing 100 percent foreign ownership in the food retail market.