New-age logistics firm Delhivery said it will acquire rival Ecom Express for ₹1,407 crore in what is among the biggest consolidation moves in the sector. The all-cash deal is a distress sale for the struggling Gurgaon-based company that cancelled its planned initial public offering (IPO) last year amid declining business. Once the closest competitor to Delhivery, Ecom Express was valued at more than ₹7,000 crore as of June 2024.
The nearly 80% cut in its valuation from its peak comes in the backdrop of a challenging time for ecommerce-focused logistics players and Ecom Express’s inability to diversify beyond servicing online retailers
Private equity firms Warburg Pincus, Partners Group and British International Investment will fully exit their investments in Ecom Express through the transaction, with Delhivery holding 99.4% stake in the company.
For Delhivery, the acquisition will help enhance scale and improve its competitive position.
Sahil Barua, cofounder and CEO of Delhivery, said, “The Indian economy requires continuous improvements in cost efficiency, speed and reach of logistics. We believe this acquisition will enable us to service customers of both companies better, through continued bold investments in infrastructure, technology, network and people.”
As of September 30, 2024, Delhivery had ₹5,488 crore in cash and cash equivalents. The transaction will require clearance from the Competition Commission of India. Delhivery said it expects to close the acquisition in the next six months. Thereafter, Ecom Express will become a subsidiary of Delhivery.
“The deal definitely helps everyone as one not-so-efficient player is out and, hence, Delhivery will be able to price reasonably and move towards long-term profitability and improve their network. How they gobble this asset and leverage it is to be seen. It will bring sanity to the pricing market for sure,” an investor in the logistics sector said on condition of anonymity.
Ecom Express was looking to raise ₹1,284.5 crore in fresh capital via its IPO, while investors, including promoters, had planned to offload stakes worth ₹1,315.5 crore. Having filed its IPO papers in August last year, the company subsequently put the plan on hold.
After it filed its draft prospectus with the Securities and Exchange Board of India last year, Delhivery accused Ecom Express of misrepresenting certain metrics.
Delhivery said that Ecom Express double-counted the number of return-to-origin shipments and, hence, ended up inflating its volume on a like-to-like basis. ‘Return to origin’ is a term used by logistics firms when a product is returned or the delivery is cancelled, and the goods go back to the seller.
Delhivery shares closed 2% down at ₹258.25 on the BSE on Friday. The company’s market capitalisation was around ₹19,200 crore.
In the months leading to the Delhivery acquisition, Ecom Express had started consolidating its operations, shutting down multiple delivery hubs and laying off hundreds of employees, people in the know said. It reported ₹2,607.3 crore in operating revenue for 2023-24, a 2.3% increase from the previous year. Its net loss narrowed to ₹255.8 crore from ₹428.1 crore in 2022-23.
Ecom Express and Delhivery were among the first third-party logistics (3PL) firms that aimed to leverage the country’s ecommerce growth in 2011-12 as the likes of Flipkart, Snapdeal and Amazon started gaining consumer traction.
After a few years, though, large horizontal ecommerce firms began building their internal logistics systems by setting up separate entities such as Ekart Logistics (by Flipkart) and Amazon Transportation Services. This is when businesses of these 3PL firms started getting impacted.
Ecommerce volumes for 3PL players saw a resurgence after Covid-19, in 2021 and 2022, as Meesho started growing. However, with Meesho launching Valmo, its in-house logistics software arm, in February 2024, the volumes of 3PL companies took a hit yet again.
Between Delhivery and Ecom Express, the listed firm gained an upper hand from previously having diversified into other segments including part-truckload and supply chain services, which account for almost 35-40% of its revenue. Ecommerce shipments continue to contribute the biggest chunk to its business.
Ecom Express, which remained focused on shipping ecommerce parcels, became overdependent on not only the sector but also one player — Meesho. Without naming the firm, Ecom Express flagged in its IPO prospectus that its top customer contributed more than 52% of its revenue in 2023-24, up from 29% in the previous financial year.
In Delhivery’s December-quarter earnings call, Barua had said that the firm was open to any deals at the right price. “The fact of the matter is that the volumes are highly concentrated for most of our competitors and so it’s not clear what value we should ascribe to those volumes,” he said. “I think the reality is it’s better to let discipline enforce itself. So, we’ll wait and watch. If the right consolidation opportunity becomes available at the right price, then obviously, Delhivery is a natural consolidator in the market.”
The nearly 80% cut in its valuation from its peak comes in the backdrop of a challenging time for ecommerce-focused logistics players and Ecom Express’s inability to diversify beyond servicing online retailers
Private equity firms Warburg Pincus, Partners Group and British International Investment will fully exit their investments in Ecom Express through the transaction, with Delhivery holding 99.4% stake in the company.
For Delhivery, the acquisition will help enhance scale and improve its competitive position.
Sahil Barua, cofounder and CEO of Delhivery, said, “The Indian economy requires continuous improvements in cost efficiency, speed and reach of logistics. We believe this acquisition will enable us to service customers of both companies better, through continued bold investments in infrastructure, technology, network and people.”
As of September 30, 2024, Delhivery had ₹5,488 crore in cash and cash equivalents. The transaction will require clearance from the Competition Commission of India. Delhivery said it expects to close the acquisition in the next six months. Thereafter, Ecom Express will become a subsidiary of Delhivery.
“The deal definitely helps everyone as one not-so-efficient player is out and, hence, Delhivery will be able to price reasonably and move towards long-term profitability and improve their network. How they gobble this asset and leverage it is to be seen. It will bring sanity to the pricing market for sure,” an investor in the logistics sector said on condition of anonymity.
Ecom Express was looking to raise ₹1,284.5 crore in fresh capital via its IPO, while investors, including promoters, had planned to offload stakes worth ₹1,315.5 crore. Having filed its IPO papers in August last year, the company subsequently put the plan on hold.
After it filed its draft prospectus with the Securities and Exchange Board of India last year, Delhivery accused Ecom Express of misrepresenting certain metrics.
Delhivery said that Ecom Express double-counted the number of return-to-origin shipments and, hence, ended up inflating its volume on a like-to-like basis. ‘Return to origin’ is a term used by logistics firms when a product is returned or the delivery is cancelled, and the goods go back to the seller.
Delhivery shares closed 2% down at ₹258.25 on the BSE on Friday. The company’s market capitalisation was around ₹19,200 crore.
In the months leading to the Delhivery acquisition, Ecom Express had started consolidating its operations, shutting down multiple delivery hubs and laying off hundreds of employees, people in the know said. It reported ₹2,607.3 crore in operating revenue for 2023-24, a 2.3% increase from the previous year. Its net loss narrowed to ₹255.8 crore from ₹428.1 crore in 2022-23.
Ecom Express and Delhivery were among the first third-party logistics (3PL) firms that aimed to leverage the country’s ecommerce growth in 2011-12 as the likes of Flipkart, Snapdeal and Amazon started gaining consumer traction.
After a few years, though, large horizontal ecommerce firms began building their internal logistics systems by setting up separate entities such as Ekart Logistics (by Flipkart) and Amazon Transportation Services. This is when businesses of these 3PL firms started getting impacted.
Ecommerce volumes for 3PL players saw a resurgence after Covid-19, in 2021 and 2022, as Meesho started growing. However, with Meesho launching Valmo, its in-house logistics software arm, in February 2024, the volumes of 3PL companies took a hit yet again.
Between Delhivery and Ecom Express, the listed firm gained an upper hand from previously having diversified into other segments including part-truckload and supply chain services, which account for almost 35-40% of its revenue. Ecommerce shipments continue to contribute the biggest chunk to its business.
Ecom Express, which remained focused on shipping ecommerce parcels, became overdependent on not only the sector but also one player — Meesho. Without naming the firm, Ecom Express flagged in its IPO prospectus that its top customer contributed more than 52% of its revenue in 2023-24, up from 29% in the previous financial year.
In Delhivery’s December-quarter earnings call, Barua had said that the firm was open to any deals at the right price. “The fact of the matter is that the volumes are highly concentrated for most of our competitors and so it’s not clear what value we should ascribe to those volumes,” he said. “I think the reality is it’s better to let discipline enforce itself. So, we’ll wait and watch. If the right consolidation opportunity becomes available at the right price, then obviously, Delhivery is a natural consolidator in the market.”
