A simple tweak in shareholding of the company owning shares of Cloudtail India — Amazon India’s biggest seller that withdrew over 3,00,000 of its products from the platform — has allowed Amazon to partially restore normalcy in the aftermath of new FDI norms that were enforced from February 1.
According to sources, Infosys co-founder N R Narayana Murthy’s investment firm Catamaran Ventures has increased its stake in Cloudtail’s parent company Prione Business Services to 76 per cent, with Amazon’s holding coming down from 49 per cent to 24 per cent stake. With this, Cloudtail ceases to be an Amazon group company, and can continue selling on Amazon’s marketplace in India.
In December, the Centre announced new regulations that bar online marketplaces with foreign investments from selling products of group companies or the entities where they hold stakes, and ban exclusive marketing arrangements.
Another provision states that the inventory of a vendor will be seen as controlled by a marketplace, if over 25 per cent of the vendor’s purchases are from the marketplace entity, including the latter’s wholesale unit.
As per a 2013 circular by the Reserve Bank of India, ‘group company’ means “two or more enterprises which, directly or indirectly, are in position to (i) exercise twenty-six per cent, or more of voting rights in other enterprise; or (ii) appoint more than fifty per cent, of members of board of directors in the other enterprise”.
According to industry experts, the definition of group company is what allowed Cloudtail to resume operations on Amazon India post the restructuring.
“Amazon remains committed to complete compliance with all the laws of the land, including Press Note 2. We have no equity participation in any seller company on our marketplace nor does any seller buy more than 25 per cent of its inventory from our wholesale business,” Amazon India said in a statement. According to sources, to meet the 25 per cent norm, Cloudtail is likely to list its products on other e-commerce platforms as well.
“We believed that it would take at least one to two months for e-commerce companies to come back to normal and figure out the operations but now we think they will sort everything out in the next 15 days or so,” Satish Meena, senior forecast analyst, Forrester Research, said.
“CAIT has taken a very serious note of reports of Amazon reducing its stake in Prione thus trying to disassociate itself from Cloudtail,” CAIT said in a statement, dubbing the latest rejig as alleged circumvention of new norms. The Confederation added it will approach the Commerce Ministry demanding that the Centre again clarify that online retailers should not hold direct, or indirect stake, in its vendors.