Amazon India Ltd and Patni Computer co-founder Ashok Patni have floated a joint venture, Frontizo Business Services Pvt. Ltd, the company’s filings with the Ministry of Corporate Affairs show.
Delhi-based Frontizo Business Services has received Rs 196.16 crore ($30 million) between June and August, with Amazon Asia Pacific Corporate Holdings contributing Rs 94.15 crore, while Zodiac Wealth Advisors, an investment fund managed by Ashok Patni and his son Apoorva Patni, pumped in Rs 100 crore. US-based Zaffre Investments LLC accounted for the rest.
According to the MCA filings, in May, Amazon Singapore, Patni LLC and Zaffre Investments had entered into a shareholding agreement, wherein Zodiac Wealth Advisors would have a controlling 51% stake in Frontizo Business Services, while Amazon and Zaffre Investments would have a 48% and 1% stake, respectively.
An Amazon spokesperson confirmed the development, but declined to divulge further details. “While we are aware of the JV between Amazon Asia-Pacific Holdings and the Patni Group, we cannot offer any comments on it.”
A spokesperson for Frontizo Business Services, however, said the JV was primarily aimed at strengthening Amazon’s customer services in India. The move was also targeted at serving the growing number of non-English speaking online shoppers. Both Flipkart and Amazon have been looking to create a customer base in Tier-II and Tier-III cities to bolster their next phase of growth.
“It is estimated that there are more than 450 million customers with internet access in India. Only a handful of them shop today through e-commerce sites. Majority of these new customers will come from small towns and rural areas and will have different needs like vernacular language support and alternate operating models to serve them,” the spokesperson added.
Frontizo, which has commenced its operations in Bengaluru offers multi-channel customer support services, including e-mail assistance, customer outreach and contact over the phone as well as on chats. The spokesperson, however, declined to comment on the next port of call for expansion.
The Economic Times and The Times of India had reported the development first.
“The Patni Group believes that the Indian consumption story is just getting started and provides tremendous business opportunities. The group’s domain and local market expertise, as well as its ability to scale businesses, positions the group to contribute meaningfully to the joint venture,” the spokesperson said.
Amazon, which had earlier set up Amazon Support Services Centre in Bengaluru, had shut down the unit recently.
The move is expected to be a win-win situation for both partners. While Amazon will get a strong local ally, the Indian partner will get an exposure to the lucrative e-commerce sector.
Frontizo is also expected to be registered as a seller along the lines of Cloudtail, which is one of Amazon’s larger seller partners. A step down subsidiary of Amazon, Cloudtail is a joint venture between Amazon’s parent and Infosys’s co-founder Narayana Murthy’s Catamaran Ventures.
Satish Meena, senior forecast analyst at research firm Forrester, said that the move was also part of Amazon’s strategy to meet regulatory compliance, while having operational control.
“In the US, 60% of Amazon’s sales come from its inventory, while third-party sellers account for the rest. As DIPP regulations do not allow for this, it suits Amazon to enter into JVs with bigger players and operate on a proxy-inventory model to indirectly control sales and consumer experience,” Meena added.
The Department of Industrial Policy and Promotion regulations stipulate that no single seller on an e-commerce platform can account for more than 25% of the annual sales. Besides, if Amazon wants to expand aggressively, a control over its inventory and sellers will translate into better margins and customer experience.
Meena said that Amazon India will ideally be looking at 50-60% of its sales through large sellers in the long term.
According to the company’s articles of association, its primary business activities, among others, include providing a technology platform to service commerce transactions, including mobile and ecommerce, for customer-to-customer and business-to-consumer domains.
Frontizo, which has been created out of another entity, Capricorn Business and Trade Services Pvt. Ltd established in 2012, started its operations in July.
The MCA filings reveal that the current board of directors at Frontizo are Amazon’s director of category management Sameer Khetarpal, Patni group’s head of corporate development Rajarshi Guin, Patni’s healthcare venture Currae Healthtech Fund Ajay Mahipal, and Essaji Vahanvati, a former partner at law firm AZB Partners and the son of former Attorney General of India Goolam Vahanvati.
The company’s first directors, Harish Bhardwaj and Kuldeep Singh Bisht, who were also the founders of Capricorn have resigned from their directorial responsibilities.
Its top-level management comprises Vinod Kumar (CEO) and Sharath Belur (CFO). Both Kumar and Belur were senior managers at Amazon India, the filings reveal.
Amazon, which had committed $ 5billion into its Indian operations, has made no bones of its India intentions. Earlier this month, it had bought a 5% stake in local brick-and-mortar retail chain Shoppers Stop Ltd to expand physical shopping points.