Amazon India’s largest seller, Cloudtail has reported a profit of USD 4.1 million in financial year 2019, with a revenue of USD 1.3 billion, an increase of 25% compared to FY 2018, according to company’s financial filings sourced from research platform Tofler, local paper Economic Times reported.
New Delhi-based Cloudtail, a joint venture between Amazon India, and Catamaran Ventures, clocked revenue totalling nearly USD 1 billion and posted a loss of USD 0.6 million in FY 18. Catamaran Ventures is Infosys co-founder Narayana Murthy’s USD 83 million private investment firm floated in 2010.
Cloudtail managed to post growth in its revenue despite major changes made by India in its FDI (foreign direct investment) rules in February 2019 that forced online marketplaces to work around the new rules and change their product sourcing pattern as well as the way they offer deep discounts. As per the revised FDI policy, foreign e-commerce companies can’t hold a majority stake in entities that sell on their platform, which caused Cloudtail to halt its operations temporarily in February.
To work around this roadblock in its path, Amazon reduced its shareholding in Cloudtail to 24% from 49%, and Catamaran in its capacity increased its holding in Cloudtail to 76%. Only after the changes in the shareholding pattern were in place, Cloudtail was able to start operations. Similarly, Amazon’s second-largest seller Appario, a joint venture between Amazon and the founders of Patni Computers had to make similar share holding adjustments to circumvent the FDI rules. On the other hand, Walmart-owned Flipkart has been less impacted as it had no equity stake in its vendors.
As of today, organized retail accounts for only about 10% of India’s retail market, which is dominated by micro sellers and mom-and-pop ‘kirana’ stores.
Currently, according to local media Entrackr, India’s national traders umbrella body, the Confederation of All India Traders (CAIT), which claims to represent over 500,000 merchants and traders in India, has complained that e-tailers, especially Amazon and Flipkart are brazenly flouting FDI norms set by India. However, the duo in question has repeatedly denied the allegations put forth by CAIT which now wants the Competition Commission of India to intervene.