Amazon seeks CCI’s nod to buy Catamaran’s stake in Cloudtail

Amazon is seeking regulatory approval to acquire Catamaran Venture’s entire stake in Prione Business Services, which houses Cloudtail, one of the largest sellers on the ecommerce major’s Indian platform. On Wednesday, Catamaran, the investment office of Infosys co-founder NR Narayana Murthy and Jeff Bezos-led Amazon announced the proposed deal, subject to regulatory approval, in a joint statement.
“Amazon has made a filing with the Competition Commission of India (

) forapproval to buy Catamaran’s stake that will give it 100% ownership in Prione,” a person aware of the matter told ET.
The valuation at which Amazon is buying out Catamaran’s stake in Prione is not known and the companies declined to comment on it saying the matter is ‘confidential’.

If the deal receives the regulator’s nod, Prione’s business– offering services like seller onboarding and making catalogues for them– is expected to continue unchanged. Cloudtail may have to go through changes in its shareholding to continue as a seller on Amazon India as prevailing regulations prohibit an entity running an online marketplace and its group companies from owning equity in any of the sellers on the platform or having control over their inventory.
In 2019, in order to comply with the new foreign direct investment regulations for ecommerce, Amazon had to reduce its stake from 49% to 24% in Cloudtail’s parent Prionewhere Catamaran now owns 76% stake.

“More clarity is expected on Cloudtail’s fate after CCI ( pronounces) it’s view on the deal,” sources added.

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The joint release by the two companies stated that “Amazon will acquire Catamaran’s shareholding in Prione in compliance with applicable laws including all assets and liabilities.”

“The businesses of the joint venture shall continue under the leadership of the current management and on receipt of regulatory approvals, the board of Prione and Cloudtail will take steps to complete the transaction in compliance with applicable laws,” it added.

People aware of developments said “this is the first step of the deal. Once the CCI nod comes there will be more changes announced at Cloudtail. They (Amazon) will absorb the staff as many of them have worked closely with Amazon besides Prione’s business will remain.”

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In a separate judgment last week, the CCI suspended Amazon’s 2019 deal with the retail major Future Group and imposed a penalty of Rs 200 crore, in what is viewed as a major setback to the American etailer’s attempt to stall the Future Group’s Rs 24,713-crore deal with Reliance Industries.

Will absorb employees

A representative for Amazon told ET that “business of Prione and Cloudtail will continue as usual, till receipt of all regulatory approvals,” without providing further details. “We will ensure that the transaction is in compliance with applicable laws,” the person added.

On Wednesday, Prione CEO Pankaj Jathar told Cloudtail ‘s employees that they will continue to be an ‘integral’ part of the joint venture unit (Prione) being acquired by Amazon.

ET has seen the note sent by Jathar.

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“There are multiple options being worked out (for Cloudtail) as there is 100% clarity that Amazon will own Prione fully and then Cloudtail can’t sell ( on its platform),” a person aware of the ecommerce giant’s thinking said.

Prione is estimated to employ around 1,200 people with a significant chunk of them working for Cloudtail. If CCI approves the proposed deal, the employees may be moved to Amazon India for various roles, people aware of the plans said.

“It is unlikely Cloudtail will cease to exist,” they added.

Earlier in August, Amazon had said it had
mutually decided with Catamaran to not continue their joint venture beyond the end of its current term, which was due to end on May 19, 2022.

Cloudtail, as per the announcement in August, was to operate as per current structures until May 2022 but if CCI’s clearance comes before that, the companies will move ahead to complete the transaction.

Cloudtail, which was set up in 2014, has emerged as one of the largest sellers on the local marketplace of Amazon in India. In fiscal 2021, its revenue shot up by over 45% to Rs 16,639 crore with a profit of more than Rs 182 crore.

At one point of time, Cloudtail was clocking more than 50% of total sales on Amazon India before government rules in 2016 stated that a single seller cannot sell over 25% of total sales on an online marketplace.

Amazon India started working with more sellers to diversify its seller base who drove
a significant part of sales on the platform. It also struck a joint venture with Patni group in 2017 to set up Frontizo Business Services. While Frontizo is involved in offering customer support services to Amazon India, its subsidiary Appario Retail is another major seller on the Amazon India marketplace. Appario Retail saw revenue of Rs 14,628 crore in FY21 with a profit of Rs 54 crore.

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