Infosys Co-founder and Wife Reap Windfall as Cloudtail Exits Amazon

A recent report by The Economic Times details the substantial profit Infosys co-founder Narayana Murthy and his wife Sudha Murthy made from their investment in Cloudtail, a former joint venture between their investment firm Catamaran and Amazon India. Here's a breakdown of the deal and its implications:

The Investment:

• In 2014, Catamaran invested Rs. 417 crore (approximately $50 million) in Cloudtail, an e-commerce marketplace platform established as a 51:49 joint venture with Amazon India.
• Cloudtail initially played a crucial role in onboarding sellers and managing logistics for Amazon India, becoming the platform's largest seller at times.

The Exit:

• In 2021, e-commerce regulations restricting marketplaces from having direct stakes in their merchants prompted Amazon to reduce its shareholding in Cloudtail to 24%.
• Subsequently, Cloudtail ceased operations as a merchant in early 2022 and shifted its focus to providing business-to-business (B2B) services.
• In 2023, Catamaran sold its remaining 76% stake in Cloudtail for a staggering Rs. 1,332 crore (approximately $160 million).

The Profit:

• This sale resulted in a remarkable profit of Rs. 915 crore (approximately $110 million) for Catamaran, representing a triple return on their initial investment in just eight years.

Key Points:

• The profitability of Cloudtail, particularly from FY19 to FY21, allowed it to secure a loan of Rs. 1,750 crore ($211 million) from HSBC in FY22, further fueling its growth.
• Although initially successful, Cloudtail faced challenges and transitioned to B2B services after regulations changed.
• While Catamaran enjoyed significant returns, Cloudtail's sales declined post-transition, dropping from over Rs. 19,000 crore ($2.3 billion) in March 2022 to Rs. 3,100 crore ($370 million) by March 2023.

Beyond the Numbers:

• This lucrative exit underscores Catamaran's successful investment strategy, known for taking small, minority stakes in various startups like Paper Boat, Udaan, and Reddit.
• However, the deal raises questions about the evolving regulatory landscape for e-commerce marketplaces and their relationships with sellers.

In Conclusion:

The Murthy's windfall from the Cloudtail deal highlights the potential for significant returns in the Indian e-commerce space, but also the dynamic nature of the industry and the impact of changing regulations. This case raises questions about balancing market forces with ensuring healthy competition and fair treatment of sellers.