Decks clear for FDI, Amazon doubles down on food retail, infuses $35 mn

Three months after a government clarification that companies with foreign direct investment (FDI) in food retail can continue to sell through e-commerce, Amazon is ramping up its efforts in the segment. The food and grocery retail unit of the online marketplace has raised Rs 240 crore ($34.7 million at current exchange rate) from Amazon Corporate Holdings Pvt. Ltd, Singapore, and Amazon.com Inc., Mauritius, according to documents sourced from the Registrar of Companies.

The January clarification mentioned above followed an announcement of revised FDI rules in December that, starting February, companies will be debarred from selling products via vendors in which they have an equity interest. The policy unnerved Amazon and Walmart-owned Indian rival, Flipkart, as it forces them to alter their business structures. However, the January clarification assured them that food retail will be out of the purview of curbs related to the e-commerce FDI policy effective from 1 February.

The central government had allowed Amazon to retail food products in the country in 2017 and the company committed $500 million to retailing food products produced and manufactured in India.

In total, Amazon Retail India, Grofers and BigBasket were given approval for FDI worth $695 million in food retail in 2017. Amazon India currently offers food products through its Amazon Pantry programme, which covers groceries and staples, while express delivery app Prime Now offers both fresh produce and staples. According to the FDI policy, marketplaces are required to keep their food retail business separate in terms of books.

Amazon had started its food retail venture in February 2018 and had acquired 99.99% equity shares in Aditya Birla-owned food retail chain More along with Samara Capital in September 2018.