Singapore-based e-commerce platform Shopee — that launched in India only in December 2021 — has decided to close operations in the country.
The official reason given by Shopee, which is controlled by NYSE-listed Sea Ltd, is changing global sentiments.
In a statement, it said, “In view of the global market uncertainties, we have decided to close risks of our early-stage Shopee India initiative.”
The e-commerce platform has been hit by growing opposition from trade associations led by Praveen Khandelwal as well as homegrown social commerce start-ups.
They alleged that it represented a back-door entry of Chinese company Tencent in clear violation of foreign direct investment (FDI) rules.
Just a few weeks ago, Shopee got relief from the Competition Commission of India (CCI), which rejected a plea for action against the company over predatory pricing.
Adding to the woes, Sea Ltd has also been in the eye of a storm as it also runs popular gaming app ‘Free Fire’ that was banned along with several Chinese apps by the Centre recently.
However, Shopee won a major victory when the CCI rejected a petition filed by Khandelwal, alleging “predatory pricing with the intent of eliminating traditional and small-scale business in the country.”
Khandelwal, who is secretary general of the Confederation of All India Traders (CAIT), said he was planning to go to the National Company Law Appellate Tribunal (NCLAT) to challenge the CCI decision.
The trade body had alleged that Shopee had violated FDI rules as Tencent had substantial holding in the Sea Group.
And, it added that the e-commerce platform entered the country through the back door using a complex structure.
CCI, in its order on March 3, observed that it does not see any prima facie evidence of contravention of provision 3 and 4 of the Competition Act against Shopee.
It has argued that Shopee was a new entrant in the market, which already has many e-commerce players.
Sources in the know said that Shopee, which has over 300 employees, will offer three months salary as separation and is trying to also find them jobs in other firms.
Also, it would provide services to sellers till May-end, so that any issues are resolved.
They pointed out that the company has also closed down its operations in France and will now focus only on becoming profitable by 2025, rather than expand into new markets.
Sea Group had made several attempts to reiterate that it is a Singaporean company. It has made it clear that it does not provide any board seat as a right to Tencent.
Currently, Tencent holds 18 per cent equity share in Sea Ltd.
According to its articles of association, which was cleared in an annual general meeting (AGM) last month, Sea Ltd founder Forrest Li would hold 57 per cent of voting power, up from 52 per cent earlier.
This is despite having only 8 per cent equity share.
This effectively ensures he has full control over the management and the Sea board. Li is a Singaporean citizen.
Having first invested in Sea Ltd in 2010, Tencent has slowly diluted its stake. It now has less than a 10 per cent voting share, according to the AGM meeting notice of Sea.
The sudden ban on Free Fire was part of the government’s crackdown on Chinese apps.
It triggered a swift response from Singapore’s ministry of trade and industry, which said that it hoped the ban would be resolved “expeditiously”.
Sources said the Singapore government is still in talks with the Indian government but no solution has been found on the contentious ban.