Please ensure Javascript is enabled for purposes of website accessibility

Instant Analysis: Amazon.com Makes an Acquisition in India

By Eric Volkman – Feb 22, 2016 at 12:31PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The retailer is buying e-commerce solutions provider Emvantage for an undisclosed sum.

What happened?
Amazon.com (AMZN -1.57%) is going abroad for its latest asset buy. The company has reached a deal to buy privately held Emvantage, a start-up online payments solutions provider based in India. The price was not disclosed.

Amazon.com will use Emvantage's technology to facilitate payments on its Indian website. Among its numerous offerings, Emvantage provides prepaid "wallet" services. In India, such services can be funded through cash payments. This is critical to the success of e-commerce in the country, as credit card penetration is relatively low and cash transactions remain common.

Amazon.com should absorb its new purchase relatively quickly; the company anticipates the transaction will close next month.

Does it matter?
In buying Emvantage, Amazon.com is securing an asset for the future. The Indian economy is growing robustly, which, when combined with increased uptake of more modern payment methods, could very well mean a real explosion in e-commerce. Goldman Sachs, for one, is estimating that the country's total e-commerce sales could reach $100 billion by 2020, from an estimated $5 billion or so in 2014.

Emvantage, of course, is not the only game in town. Other online payment providers, be they local start-ups or competitors from outside the country, also have an early presence in the country. And we can imagine that before long, Western rivals like PayPal Holdings (PYPL -2.96%) will ramp up their presence, too.

By buying into the space relatively early, though, Amazon.com stands an excellent chance of becoming a (or even the) standard online payment option. This would be reminiscent of how eBay established PayPal as a top e-commerce option back when the payments provider was under its wing (PayPal was spun off into a stand-alone company last year).

Although it's difficult to ascertain just how the e-payments segment will shape up in India over the next few years, it's good that Amazon.com is wedging itself in early. Assuming it didn't pay an arm and a leg for Emvantage, we can consider this to be a smart move by the retailer.

Eric Volkman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com, eBay, and PayPal Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$113.00 (-1.57%) $-1.80
eBay Inc. Stock Quote
eBay Inc.
EBAY
$36.81 (-2.33%) $0.88
PayPal Holdings, Inc. Stock Quote
PayPal Holdings, Inc.
PYPL
$86.07 (-2.96%) $-2.63

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.