Dawntech Gets Amazon India's Electronic Goods Business, A Replacement of Cloudtail

The new company, Bengaluru-based Dawntech Electronics, is the first such independent well-funded preferred seller that is getting the business of Cloudtail, which earlier this year announced that it would wind up operations by next May.
Dawntech Gets Amazon India’s Electronic Goods Business, A Replacement of Cloudtail

The Salarpuria-Sattva Group, one of the largest real estate developers in South India, has incorporated a company that will take over the entire consumer electronics business of Cloudtail India Pvt. Ltd., currently the largest seller on Amazon’s marketplace in India.

The new company, Bengaluru-based Dawntech Electronics, is the first such independent well-funded preferred seller that is getting the business of Cloudtail, which earlier this year announced that it would wind up operations by next May. As per Dawntech’s regulatory filings with the Registrar of Companies, Amazon is not a stakeholder.

Amazon is also in the process of appointing sellers in other categories to take over from Cloudtail and there too it would not own any stake, industry executives said. It will likely finalize a seller to replace Cloudtail in the fashion category next month, said the chief executive of a top apparel brand.

An Amazon India spokesperson said Amazon.in is a pure-play marketplace with close to a million sellers from all over India. "Our approach is to enable businesses of all sizes digitally to offer the largest selection to the customers, at great value and with the convenience of fast and reliable delivery," the person said.

Amazon’s action mirrors that of rival Flipkart, which is also limiting the share of each seller’s sales on its platform and staying away from having any stake in them. Both companies have been accused by opponents including small traders of operating front companies to sidestep India’s regulations that bar foreign-owned marketplaces from selling anything of their own. Critics have also been targeting Infosys cofounder NR Narayana Murthy for his association with Cloudtail—the seller’s holding company, Prione Business Services, is a joint venture of Amazon and Murthy’s Catamaran Ventures.

In fact, the allegations and the possibility of regulatory actions might have been among the reasons why Cloudtail is being wound up, the executives said. However, Amazon continues to hold a stake in the parent company of another leading seller on the platform, Appario Retail, according to the latest RoC filings.

Amazon wants companies that have high capital to become sellers on its platform in place of Cloudtail. For large categories like smartphones, there may be two-three sellers taking over the business and Dawntech might also be one of them, the executives said.

Dawntech has already started sales of Samsung and OnePlus TVs on the Amazon platform. Cloudtail has stopped buying from consumer electronics brands this month and is currently liquidating the existing inventory. It significantly reduced buying of FMCG products and apparel from September, according to the executive. As per a recent document from rating firm ICRA, Dawntech is supposed to primarily sell mobile phones under the electronic goods category.

“However, Dawntech’s current balance sheet cannot support operations at the scale on which Cloudtail has been operating and a significant infusion of capital is required,” said Mohit Yadav, Founder, Business Intelligence Firm AltInfo, who analyzed the RoC filings.

The ICRA document noted that Dawntech intends to raise Rs 150 crore as working capital and being a part of the Salarpuria-Sattva Group, it enjoys significant financial flexibility by way of support extended from the group and its promoters. It said Dawntech is a special purpose vehicle of the Salarpuria-Sattva Group.

According to RoC filings by Dawntech, the company was initially set up as a construction company, but the memorandum of association was altered twice to sell electronics goods and consumer products online and offline.

Cloudtail posted a net profit of Rs 183 crore on revenue of Rs 16,639 crore in 2020-21, according to its RoC filings. TVs, household appliances like refrigerators, microwave ovens, air-conditioners, washing machines, and smartphones were the largest revenue generators for Cloudtail.

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