E-commerce unit Sea Shopee to close operations in India

SINGAPORE, March 28 (Reuters) – E-commerce and gaming company Sea Ltd (SE.N) said on Monday it was pulling out of the Indian retail market just months after starting operations there, the second setback this month in a campaign of overseas expansion, as the loss-making company faces weak growth prospects.

The withdrawal, effective from March 29, comes weeks after its e-commerce arm Shopee announced it was pulling out of France and after India banned Sea’s popular gaming app “Free Fire”. .

After the ban, the market value of New York-listed Sea plummeted $16 billion in a single day, leading some investors to trim their holdings in the Singapore-based company.

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Shopee said in a statement that its withdrawal came “in light of the uncertainties in the global market” and that the company would make “the process as smooth as possible”.

Earlier this month, Sea said revenue growth in its e-commerce business is expected to halve to around 76% this year, from 157% in 2021, amid lower purchases and online engagements. line as more countries emerge from the pandemic.

“Due to a drastic shift in market sentiment towards growth stocks, all of these e-commerce companies are under real pressure to at least break even as soon as possible,” said Oshadhi Kumarasiri, equity analyst from LightStream Research, which publishes on the Smartkarma platform.

Sea’s U.S.-listed shares fell 3.2% to $112.35 in afternoon trading.

The company’s shares had already fallen 11% in January after Chinese tech giant Tencent (0700.HK) announced it was selling 14.5 million shares of the group.

There is no clear evidence that the decision to pull out of India was based on government pressure or other operational decisions, said Citi analyst Alicia Yap.

Reuters was first to report on Sea’s decision on its Indian operations.

Shopee’s business in India began in October 2021 as part of an aggressive international push that has seen it expand into Europe. Sea’s market capitalization at the time reached $200 billion. It has since fallen to $64.76 billion in March 2022.

The local unit, Shopee India, recruited local sellers and launched a shopping website and app. India’s growing e-commerce market was already dominated by players such as Amazon.com Inc and Walmart’s Flipkart.

A person with direct knowledge of the company’s thinking said Shopee’s decision to leave India was triggered in part by tougher regulatory scrutiny that saw Sea’s Free Fire gaming app banned in part of a crackdown on companies that allegedly sent data to servers in China.

Sea said earlier in March that it does not transfer or store Indian user data in China.

The person said that Shopee had planned to invest up to $1 billion in India and that the withdrawal would hurt Indian logistics companies with which it had signed lucrative contracts.

The company, asked to comment on the figure, disputed the figure as “inaccurate”, without giving details, saying “the decision regarding Shopee India has nothing to do with regulatory matters”.

“We continue to work to resolve the situation with Free Fire in India,” the company added.

Reuters reported in February, citing sources, that authorities in Singapore raised concerns with India over the ban, asking why Sea had been targeted.

E-commerce players face a strict regulatory environment in India. New Delhi has imposed restrictions for years to protect small physical retailers.

Offline retailers in India have often alleged that foreign companies circumvent regulations and offer steep discounts that hurt their business, allegations the companies deny. Shopee had in recent months faced boycott calls from such traders in India.

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Reporting by Fanny Potkin and Aditya Kalra; Additional reporting by Anshuman Daga, Miyoung Kim and Akash Sriram; Editing by Bradley Perrett and Bernadette Baum

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