NCLT Clears Merger Of Amazon Transportation Services With Seller Services
The aim is to simplify its organizational structure amidst slowing e-tail market growth in India
The National Company Law Tribunal (NCLT) has granted interim clearance to American e-commerce giant Amazon to merge its Indian logistics arm, Amazon Transportation Services (ATS), with its primary marketplace entity, Amazon Seller Services (ASS).
The purpose is to reduce legal and regulatory compliance requirements and better manage the infrastructure and resources of the two entities.
Amazon stated, “Like most multinational companies, Amazon has a number of subsidiaries worldwide. We regularly evaluate our organizational structure. The purpose of the transaction is to simplify that structure.”
ATS was set up in 2013 as an in-house logistics arm for the e-commerce marketplace and derives over 95 percent of its revenue from Amazon. A decade later, the company opened its logistics services to third-party clients.
For fiscal year 2024, ATS reported a 7.6% increase in operating revenue to Rs.4,889 crore from Rs.4,543 crore in 2023. The company’s net loss narrowed by 6.9 percent to Rs.80 crore, from Rs.86 crore in FY 2023.
On the other hand, ASS reported Rs.25,406 crore in operating revenue during FY 2024, growing 14 percent as against 3 percent in FY 2023. In 2024, India’s e-tail market growth slowed 10-12 percent from over 20 percent.
The US-based company also operates Amazon Pay, a fintech business, through a separate entity.
India’s e-commerce regulations allow foreign-owned companies to operate in the online retail space only on a marketplace model. It specifies that any service provided by these platforms to sellers, including warehousing, logistics, or fulfilment, must be done fairly.
It’s unlikely that the rules would impact Amazon, as it owns 99 percent of ATS and ASS.
Meanwhile, an Indian legal expert stated, “The 2018 FDI rules on e-commerce said that the marketplace entity cannot hold a direct or indirect stake in any of its sellers or service providers. It was done to reduce the influence of the marketplace on the level-playing field.”