These are the ways global companies are bypassing the Indian FDI norms

Amazon Logo on a Samsung Phone

The Indian government seems pretty keen on providing a favourable environment to the local players in order to help them grow amidst the strong global competition. To do this, the government has issued the guidelines for foreign companies to make investments and carry out business within India. The companies need to follow guidelines thoroughly.

Amazon is one of the largest etailers in the world. They are looking forward to dominating the Indian e-commerce space, which is currently led by the Indian giant Flipkart. In pursuit of that, the American company ventured into numerous verticals within the e-commerce sector itself. It wanted to spread its tentacles into the offline retail business as well. For this, they tried to acquire the Aditya Birla Retail’s More Supermarket chain. However, the biggest hurdle in the way was the new FDI policy by the Indian government.

The new FDI policy makes the e-commerce market dealing very complicated. The companies are trying a much as they can to bypass the laws legally and reach a favourable position. Amazon, with their superior Indian legal team, seems to have cracked the code for the complicated situation as they have come up with a brilliant plan, which is complicated yet effective.

Amazon is not allowed to own major stakes in More Supermarkets as the supermarket sells well through the Amazon platform. This is according to the government’s rules. Amazon wanted a way out differently. There is one company called Witzig Advisory services, which is owned 51% by Samara Capital that makes the company an India owned and controlled company. Amazon invested in the company and now owns 49% of the stakes through two types of shares. Amazon owns only 17% of class A shares that have voting rights. The rest 32% shares are the class B shares that do not carry voting right called Differential Voting Rights (DVR).

Interestingly, Witzig purchased the More supermarket chain from Aditya Birla Retail shortly after the investments were done by Amazon. Now, the rules have been bypassed by all the three parties and technically Amazon has a greater say in More via Witzig. This way the rules are intact and the business can be carried out normally too where More can still sell their products on the Amazon’s platform.

-Soumya De

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