Amazon India considers stake in QwikCilver Solutions

Amazon India is in advanced talks to buy a minority stake in gift card technology and retail firm QwikCilver Solutions as it battles Flipkart and Snapdeal for primacy in India’s online retail industry.

The deal, if successful, will mark the first investment in an Indian startup by the Seattle-based firm.

“Amazon could pick up about 20 per cent in QwikCilver,” and anonymous source told the Economic Times.  The paper was unable to ascertain the value of the possible deal.

QwikCilver has raised an undisclosed amount of funding from Accel Partners and Helion Venture Partners, who are the two main investors. The Bangalore-based company was founded in 2008 and provides backend technology for the gift card business of several retailers including Shoppers Stop, Lifestyle, Westside and Croma.

Flipkart has also been interested in Qwiksilver, an Economic Times source added, but talks have progressed further with Amazon, possible because the company was not expected to only service Amazon’s needs.

“Amazon has promised to let them run as a separate business where they can continue to service other clients, including Flipkart,” said the source.

A spokeswoman for Amazon refused to comment, and Flipkard and QwikCilver did not reply to ET enquiries.

Flipkart has raised over $1.2 billion this year while Snapdeal has raised over $230 million and is set to announce another round of funding by Japan’s SoftBank on Tuesday. Amazon India has also received $2 billion from its parent company.

The three companies are fighting for the leadership position in the fast-growing Indian online retail industry, which is estimated to reach $6 billion next year. Experts believe acquisitions and investments will give these companies a competitive advantage.

“Large online retailers in India will have to look at investing in or acquiring companies that have a potential to scale and are in niches that they are not present in,” said Raja Lahiri, a partner at financial advisory firm Grant Thornton India.

Amazon has held preliminary discussions with online fashion portal Jabong to take on competition from the Flipkart-Myntra combination. But QwikCilver is expected to give Amazon an edge.

“Gift cards are a very important vertical for Amazon globally. In India, there is a challenge in the form of the requirement of a RBI licence,” and Economic Times source said.

Neither Amazon nor Flipkart can obtain a licence to issue prepaid payment instruments to store cash that can be used for transactions on multiple platforms. Others who have the licence in India include Paytm and Mobikwik.

Paytm is one of the three companies in which Japan’s Soft-Bank is expected to make an investment.

The Indian gift card industry is estimated to grow to Rs 9,000 crore by 2016, according to a white paper published by QwikCilver earlier this year.

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