When US retail giant Walmart acquired India’s biggest online marketplace Flipkart, its rival Amazon firmed up plans to pick up a stake in traditional Indian retailers.
Seattle-based Amazon had reportedly set aside close to US$2 billion for investment in various retail chains to expand its offline footprint. But the Indian government suddenly changed regulations for foreign investment in e-commerce, which kicked in on February 1, forcing Amazon to put a brake on its plans.
It has now decided to put on hold its plans to pick up a 12-15% stake in Future Group, a retail chain promoted by Indian businessman Kishore Biyani, for $700 million, Business Standard reports.
Future Group owns retail chains such as Big Bazaar, EasyDay, Nilgiri’s and HyperCity, and has a footprint in more than 300 cities in India through its 1,035 stores.
The US online giant is also reassessing its recent acquisition of More retail stores. Last September, Amazon and private equity firm Samara Capital bought the Aditya Birla Group’s retail food chain. It picked up 49%, while Samara acquired the rest. Though the deal has got all the regulatory approvals, no money has changed hands yet.
The US company is assessing the damage caused by the sudden change in regulations covering e-commerce in India. It had to change its business model suddenly to comply with the new rules and is still awaiting clarity from the government on these matters.
The e-commerce rules, which kicked in 11 days ago, aim to curb marketing practices such as offering steep discounts and striking deals with sellers to sell exclusively on their platforms. They also prevent these platforms from selling products distributed by companies in which they have invested.
Amazon had to take off products sold by its holding companies Cloudtail and Appario, leading to widespread disruption. It later restructured its stake in these two companies and they resumed their sales on Amazon from February 7 onward.