Overview of the Merger

Amazon Transportation Services (ATS), the logistics division of Amazon in India, is merging with Amazon Seller Services, which operates the primary marketplace in the region. This decision comes following a board approval and was disclosed in a document filed with the Registrar of Companies (RoC).

The National Company Law Tribunal (NCLT) granted interim approval for the merger, which aims to simplify compliance requirements and enhance the efficiency of infrastructure management across the two entities.

Reason for the Merger

Amazon explained the initiative by stating, “Like most multinational companies, Amazon has a number of subsidiaries around the world, and we regularly evaluate our organisational structure. The purpose of this transaction is to simplify our organisational structure.” This strategic move follows Amazon’s increasing push to streamline its operations in India.

Financial Performance

• For FY 2024, ATS reported an operating revenue of ₹4,889 crore, up 7.6% from ₹4,543 crore a year earlier.
• The company managed to reduce its net loss to ₹80 crore from ₹86 crore in FY 2023.
• In comparison, Amazon Seller Services recorded an operating revenue of ₹25,406 crore in FY 2024, showing a 14% growth compared to 3% the previous fiscal year.

However, the e-commerce sector in India saw a slowdown in growth rates, declining by 10-12% in 2024, as reported by Bain & Company and Flipkart.

Market Context

A significant portion of ATS’s revenue, over 95%, previously came from Amazon operations. Since 2023, the company has also started offering logistics services to third-party clients.

Competitors, including Flipkart with its Ekart Logistics, and Meesho, which launched its logistics platform Valmo, highlight the competitive landscape in the Indian logistics market.

Capital Infusion and Future Prospects

Over the fiscal years 2022 and 2023, ATS received ₹1,140 crore in capital. However, there have been no new funding injections from Amazon’s global parent since January 2023, raising questions about ongoing financial support.

Amazon is reportedly contemplating a spin-off of its Indian business for a potential public listing, although the merger appears to be a separate initiative from this broader strategy.

Legal Considerations

Current Indian e-commerce regulations restrict foreign-owned companies from direct involvement in retail sales, necessitating an arm’s length approach to services such as warehousing and logistics. Legal experts contend the effects of these rules on the merger remain uncertain, given that Amazon’s parent company holds dominant stakes in both merging entities.