Amazon, Flipkart losses will shoot up due to new FDI policy, says JP Morgan

The new FDI policy implemented by the government will not only cause a temporary restructuring of online marketplaces such as Amazon and Flipkart but will witness shoot up in their losses for the long term.

According to New York-based investment bank and financial services firm JP Morgan, Flipkart and Amazon both losses will shoot up in three years.

Amazon, which has already witnessed a 30 per cent increase in losses to Rs 6,287 crore in FY18, could witness around 100 per cent rise in three years. Whereas as its rival may see an incremental loss of $280 million, added Morgan.

This will also impact the international business of Amazon. Its global losses could go up to around $4 billion in the same period, the TOI report said citing the financial firm. By 2020, Amazon India revenue would be cut abruptly to about $5.3 billion due to the new policy against the original estimate of $7.3 billion.

It will also impact the Flipkart market share, which is around 48 per cent, in the country in the next few years.

The new FDI norm will lead to a rise in Amazon India investment and losses from restructuring its business operations. At the same time, it will make e-commerce landscape easier to access for Indian firms, said Morgan.

Both the e-tailers, including their marketplace as well as wholesale arms, together reported losses of over Rs 9,500 crore at the end of March 2018.

Earlier, the new FDI policy comes up with new rules asking them to curb discounts and cashbacks, no ownership in sellers on the marketplace platform and not permitting exclusive product launches.

Soon after its implementation, Amazon, and Walmart both together witnessed market cap loss of $50 billion.

Last week, Morgan Stanley in a report had said that India's new FDI norms for e-commerce might push the US retail behemoth to divest its stake in the homegrown e-tailer. However, Flipkart CEO refuted the report.

Meanwhile, the govt has assured industry that that better enforcement of the FDI policy on e-commerce will contribute to the growth of the sector and create a level playing field for new players.