Amazon to acquire Prione Business, company's JV with Narayana Murthy firm

Amazon will acquire Prione Business Services, the e-commerce giant’s joint venture (JV) with Catamaran Ventures subject to regulatory approval.

Catamaran belongs to Infosys co-founder N R Narayana Murthy; the two partners announced in August they would discontinue the venture when its term ends in May 2022.

“Amazon will acquire Catamaran’s shareholding in Prione in compliance with applicable laws including all assets and liabilities,” said an Amazon spokesperson on Wednesday. “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 & Cloudtail (owned by Prione) will take steps to complete the transaction in compliance with applicable laws.”

Prione, which had successful run for seven years, was coming up for renewal on May 19, 2022. The JV had enabled over 300,000 sellers and entrepreneurs to go online. It also enabled 4 million merchants with digital payment capabilities, providing these small and medium-sized businesses (SMBs) and merchants access to millions of customers across the country.

The relationship between Murthy and Amazon founder Jeff Bezos dates to 2014, when Prione, a 49:51 JV, was formed. In 2019, the JV was restructured after the government issued Press Note 2 stipulating that foreign e-commerce marketplaces cannot sell the products of their group companies on their platforms.

Following this, Catamaran Ventures increased its stake in Prione to 76 per cent, reducing Amazon Asia’s stake to 24 per cent. Prione’s mission was to enable small and medium businesses (SMBs) to grow in e-commerce, which was at a nascent stage in India. Last year, Prione enabled 52,000 SMBs and its goal this year was to assist 100,000 businesses. With operations in Bengaluru, Delhi and Mumbai, Prione had over 700 employees and has a reach in at least 150 Indian cities.

A major chunk of Prione’s revenues came from its ownership of Cloudtail, one of the biggest and most profitable retailers on Amazon’s platform.

In August this year, concerted pressure from the government, powerful traders’ lobbies and regulatory scrutiny prompted Amazon and Catamaran Ventures to announce that it would discontinue the JV when it ends on May 19, 2022. With that announcement in August this year, Cloudtail technically ceases to be an Amazon group company, making it compliant with the foreign direct investment (FDI) e-commerce rules on paper.

With the country’s online market projected to soar to $1 trillion, this was a major setback for the American e-commerce giant. Analysts had said that the future of Cloudtail was uncertain. They had said Amazon may reach out to large brands to take over the business from Cloudtail and it may even be sold to other players.

But now Amazon has decided to acquire Prione. Amazon had been facing the heat from various Indian regulatory bodies of late. The Consolidated FDI Policy of the ministry of commerce and industry, brought into effect from 15 October 2020, has restricted companies with FDI in engaging in retail trading by means of e-commerce. Recently, the Enforcement Directorate initiated an investigation against Amazon for violation of various provisions of the Foreign Exchange Management Act (FEMA).

Legal experts said Amazon acquiring full stake in JV Prione Business Services would have a significant impact on its business as it would enable Amazon to retain biggest asset in the e-commerce market battle and ensure no adverse consequences for the business. Salman Waris, managing partner at technology law firm TechLegis Advocates & Solicitors, said the deal would still need regulatory approvals and can face hurdles from the Competition Commission of India (CCI). "But with Prione’s originally stated mission to enable small and medium businesses to grow in e-commerce, the announcement comes as a good news to the overall ecommerce market ecosystem," said Waris. "The earlier announced end of the JV could have seen several small businesses being left in the lurch and forced to reconfigure themselves and re-enter the market in their individual capacity, specially as Cloudtail provided logistical, commercial and operations-based assistance to many vendors and registered MSMEs."