Cloudtail, the largest seller on Amazon’s India website that suspended operations about a week ago, is making a comeback on Thursday after restructuring its ownership so that it is no longer a group company of the marketplace. NR Narayana Murthy’s Catamaran Ventures has increased its stake in Cloudtail’s parent company Prione Business Services to 76% from 51% earlier, reducing JV partner Amazon Asia’s stake to 24% from 49%, people aware of the matter said. With this change, Cloudtail ceases to be an Amazon group company and becomes eligible to sell on the marketplace. Cloudtail also has independent plans. It will list on online marketplaces Snapdeal, Indiamart and other sites, and will also have its own website.
Appario, the other large seller on Amazon, will make a comeback through the same restructuring route shortly, the people said. Appario is a subsidiary of Frontizo, which is a joint venture company in which the Patni Group holds a 51% stake and Amazon Asia Pacific Holdings holds 48%. The restructuring was necessary because the norms announced on December 26 prohibit marketplaces and their group companies from equity participation in any of their sellers or control over inventory, affecting Cloudtail and Appario the most. Both companies went off Amazon.in on February 1, when the norms kicked in.
According to a 2013 notification of the Reserve Bank of India with regard to FDI in India, a group company means two or more enterprises, which, directly or indirectly, are in a position to exercise 26% or more voting rights in the other enterprise or can appoint more than 50% of the members of the board of directors in the other enterprise. In both Cloudtail and Appario, Amazon’s group companies will now hold 24% stakes and will not have any directors on their boards, making them compliant with the laws.
India’s ecommerce landscape is going through a churn. The government does not allow FDI in inventory-based ecommerce to consumers. However, it allows FDI in marketplaces where independent sellers can list and sell goods. Brick-andmortar retailers have alleged that such marketplaces are violating rules and actually holding their own stock and selling cheap. In an election year, the government took notice and came out with clarifications on the rules, choking the smooth functioning of such companies. The rules also stipulate that the inventory of a seller will be deemed to be controlled by a marketplace if more than 25% of the vendor’s purchases are from the marketplace entity, including its wholesale unit.
Justifying the December 26 announcements, the government said that despite spelling out FDI norms in Press Note 3 of 2016, it continued to receive complaints from traders and other offline retailers that certain marketplace platforms were violating the policy by influencing the prices of products and indirectly engaging in predatory pricing.