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.
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, domestic companies are allowed to follow an inventory-led model, which enables them to maintain stock, control branding and quality, and ensure faster deliveries at reduced logistics costs. While Amazon may not immediately transition to this model, spinning off its Indian entity and eventually increasing local shareholder ownership could create pathways for greater control over its operations in the long run, industry sources said.
The timing of Amazon’s deliberations coincides with recent leadership changes in its India division. The company has faced growing challenges in the country, with Flipkart continuing to dominate nearly half of the e-commerce market. Additionally, competition is intensifying from emerging players like Meesho, backed by SoftBank, which recently secured over $500 million in new funding.
Another challenge for Amazon in India has been its late entry into the quick commerce space. While it has begun pilot services, it now faces stiff competition from established players such as Swiggy Instamart, Blinkit, and Zepto, all of which have a strong foothold in the segment.
Meanwhile, Flipkart, Amazon’s primary competitor in India, is also gearing up for a public listing. It is in the process of shifting its legal domicile from Singapore to India, a necessary step before an IPO. The company has reportedly started engaging with bankers and is targeting a listing within the next 12 to 15 months.