Cloudtail losing revenue growth owing to strict FDI rules of Government of India

Cloudtail, the JV between Amazon and Infosys founder Narayanmurty’s investment arm Catamaran, crossed the INR5,000 crore revenue mark in March’17, however, the growth tapered off significantly, indicating its fading role as the company seeks to comply with foreign direct investment (FDI) rules on marketplaces. The government had directed last year that it will not permit a single vendor to account for more than 25% of sales on an online marketplace that has overseas investment.

To comply with the norms, Cloudtail almost stopped selling mobile phones a year ago but continued with Amazon private labels in India. Smartphones constitute the largest category of India’s ecommerce sales and formed a big part of Cloudtail’s overall sales in previous years. Amazon’s spokesperson commented that “With the smaller pace of growth by exiting smartphones, Cloudtail will surely comply with the FDI norms of one seller accounting for 25% of total transactions at Amazon last fiscal itself”. Cloudtail’s gaze is on consumables such as FMCG, nutrition, apparel and televisions, which are the next focus areas for Amazon. Personal care, baby care and nutrition are also of interest. It currently sells Amazon exclusive television brands like TCL, Sanyo and BPL.