E-commerce major, Amazon, is exploring the possibility of spinning off its India operations and listing it, according to industry sources. The company, which is the second largest player in the e-commerce sector, behind Flipkart, has initiated preliminary talks with investment banks to assess the feasibility of such a move, sources added.
According to a report in YourStory, which first broke the story, Amazon has reached out to multiple investment banks in the country and has also engaged with JP Morgan, its Wall Street banking partner.
“Amazon has begun conversations with banking advisors regarding a potential spinoff and local listing in India. Data localisation requirements and the ability to maintain direct inventory are among the key factors driving this consideration,” sources said. “Last week, Amazon’s management, including senior executives from India and the US, held discussions with 8-10 investment banks, but these are still in the initial stages,” the source added.
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However, some legal experts told Fe that Amazon is unlikely to get the valuation it may be looking for because of the ongoing investigations by the Competition Commission of India. The fair trade regulator has ordered a probe into Flipkart and Amazon following allegations of malpractices, including deep discounting and tie-ups with preferred sellers on their platforms.
When contacted, an Amazon spokesperson declined to confirm the development, stating that the company does not respond to “rumours and speculations”.
As per current government regulations, e-commerce firms in the B2C segment cannot hold inventory if foreign direct investment in them is 51% and above. They can only act as a platform for independent sellers to retail their products, which is called a marketplace model. They are bound by certain other conditions also. For instance, they are barred from influencing prices, giving preferential treatment, or offering deep discounts selectively through certain sellers.
According to the regulations, marketplaces must provide a level playing field for all sellers through a fair and non-discriminatory treatment of sellers. Pess Note 2 prohibits marketplace e-commerce platforms from owning equity or having control over the inventory of sellers on their platform. If a seller’s inventory is more than 25% sourced from a marketplace entity or its group companies, it will be deemed an inventory-based model.
However,
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