Amazon has entered into a joint venture with the promoters of Patni Computers, pioneers in the IT services industry in India, to strengthen its customer service unit and build another large captive seller for its e-commerce platform in India.
Frontizo Business Services, the entity formed under the JV, which has been operational since June, has received Rs 196 crore in investments over two tranches. The JV is similar to the one Amazon has with Infosys founder Narayana Murthy’s Catamaran Ventures called Cloudtail.
Interestingly, Murthy used to be an employee of Patni Computers before he quit the firm to start Infosys.
According to documents filed with the Ministry of Corporate Affairs, 51 percent stake in the entity is held by Zodiac Wealth Advisors, a company floated by Ashok Patni and his son Apoorva Patni, 48 percent is held by Amazon Asia Pacific Holdings and 1 percent is held by US-based venture capital firm Zaffre LLC.
The Times of India newspaper first reported about the deal between Patni promoters and Amazon on Monday.
The current role of the JV is to build a multi-channel customer support service for Amazon in India, which is looking to penetrate deeper into India’s hinterland. The Patni Group has had vast experience in running back office operations in India, something that is crucial for Amazon to build a great service here.
In due time, Frontizo could spin off another entity that will function as a seller on Amazon’s platform, similar to Cloudtail. Amazon has been looking for partners in India to form captive sellers ever since the Department of Industrial Policy and Promotion altered the FDI rules for e-commerce marketplaces disallowing a single seller to contribute more than 25 percent sales on any platform.
While Amazon and Flipkart are marketplaces and expected not to have sellers of their own, both firms have put in complex holding structures that has allowed them to circumvent the rule. Amazon has been on the lookout for tie-ups with prominent business houses in India to form large sellers and control inventory sold on its platform.
Amazon has been seen as stepping up the pace of its investments in India over the past year. Since January, the company has disclosed $600 million in investments and even picked up 5 percent stake in offline retail giant Shoppers Stop last week. While it says a true offline play is still a while away, it does show the long-term play Amazon is looking at in India.
Source: Business-Standard 