Why emphasized Delhivery has acquired a distress Ecom Express

Copyright © HT Digital Streams Limit all rights reserved. Companies Soumya Gupta 11 min Read 10 Apr 2025, 06:19 PM is a file photo of a warehouse run by Delhivery. (X) Summary Express B2C -Logistics firm Delhivery has not really fired when it comes to the stock market returns. It also struggled with profitability. Will the purchase of rival Ecom Express affect his books? Mumbai: It took less than a year before everything could unravel. In August 2024, India’s second largest logistics firm (B2C), ECom Express, applied for an initial public offer. Rating: Nearly £ 7,500 crore. This month, the company was sold to its biggest competitor, Delhivery, for less than half the amount. In between, both businesses had an uncomfortable splash via stock exchange. In its draft prospectus, ECom Express claimed that it fared better than the much larger delhivery on some important statistics, including costs per parcel. Delhivery opposed it by saying that Ecom Express may lie about the numbers. None of that matters now. Earlier this year, Ecom Express placed its public presentation plans at break and began to reduce aggressively. And by April it was sold. The biggest reason for its decline is well known: More than half of ECom Express’s revenue comes from a single customer who says most in the industry, mostly, the Tier-II and -III focused e-commerce platform. In February 2024, Men’s own internal logistics arm named Valmo launched and allegedly stopped using Ecom Express services for most of his consignments. Ecom Express, who has its biggest client, quickly haunted downwards and couldn’t keep the landing on the best way out: a public listing. The acquisition was the next best result for its investors – the list contains PE -firm Warburg Pincus and Impact Fund British International Investment. Obviously, Ecom Express needs an agreement with Delhivery, even at a meager valuation. With a transaction size of £ 1,407 crore, ECom Express sells for about 0.6x enterprise value-to-sales (EV/sales), based on the financial reporting for FY24. But what is there for Delhivery? The market leader has been struggling with profitability and poor market performance since it was listed in May 2022. Poor -rationale analysts who detect this segment of logistics – B2C -DERDEPARTY (3PL) surface logistics – are divided. A Delhivery spokesman refused to comment and said the company was still awaiting the Competition Commission of India for the agreement. A spokeswoman for ECom Express also refused to comment. Emkay, brokerage firm Emkay, wrote in a note this week that the acquisition of ECom Express could help save significant costs. “We expect significant costs to run over the next 12-18 months, as Delhivery can rationalize the overlapping network infrastructure, such as the sorting of hubs, processing, delivery centers …” the report states. “The combined entity would recommend a market share of 55-60% of the 3PL B2C Express market and dwarf the immediate counterpart with ~ 3x.” Other major firms in this segment of the logistics enterprise include Xpressbees, formerly the internal logistics arm of baby products e-commerce marketplace firstcry, and Shadowfax. In addition, Legacy Courier businesses also make some express B2C deliveries for online sellers, such as Blue Dart Express and Allcargo Gati. “There are several benefits for delhivering of this agreement,” another senior analyst of the shares that the firm detects, told Mint to request anonymity. ‘First, the competition in this segment is reduced. This means that the price failure that was underway will also be reduced. After the merger of these two firms, the only main player remaining will be Xpressbees. Both will notice that there is no point, ‘the analyst explained. With a massive financing attracting competition for the B2C logistics pie, firms in the business have begun to undermine each other over the past few years. It became more outspoken after Moss Ho Valmo began. “It’s hard to exclude exactly how many prices are generally dropping, but in general these firms could not pass on their rising input costs to their customers,” the analyst quoted above. This was one of the reasons why Delhivery and Ecom Express struggled with losses, although the former turned his fate, FY25 began. Some analysts who locate the sector say that there is little long -term value in the agreement. “Yes, it is a pleasant agreement and Delhivery’s market share will undoubtedly rise,” Rajarshi Maitra, co -director of stock exchange firm Incred Research Service, told Mint. ‘But this market share will not rise much. Ideally, the agreement should reduce your costs per parcel and sent per unit volume. At the moment, the cost per pack seems to be similar to both companies in an explicit delivery, although Delhivery’s volumes are 1.8x higher than that of ECom Express. Even their EBIT margins (earnings before interest and tax) are similar, “he added. The implication of this is that it is difficult to see what more value Delhivery can print from the already flurry ECom Express, given the significant overlap in the business. Stop serving about 3000 Pincodes in an attempt to cut costs, Mint reported. Shipment for ECom Express’ Express delivery £ 39.65 in FY24 and nearly £ 56 for Delhivery. EBITDA is earnings before interest, tax, depreciation and amortization. However, Delhivery has disputed these and other criteria that ECom offered Express potential investors in their draft IPO documents. In September last year, Delhivery filed a note with the BSE that accused ECom Express of misrepresenting these numbers. The most important accusation it made was that the company probably counted twice ‘return to origin’ or RTO orders, thus inflating its total number of consignments in a year and artificially reducing the costs by shipping. It is also alleged that ECom Express has inflated the number of Pincodes it serves, which completely exceeds the total number of Pincodes in India, according to the government’s records. Ecom Express did not address these allegations. But given this background, how many efficiency or scale benefits can ECom explicitly bring to the table for Delhivery? Bad history, in addition, shows Maitra, the last major acquisition of Delhivery, was an lead on the performance of the business. In August 2021, it bought Bengaluru-based Spoton Logistics, a PTL business (PTL), which delivered goods to different companies, by compiling their relatively small orders in larger trucks. Delhivery has already run a PTL business that he plans to merge with Spoton to expand the vertical. The acquisition was in trouble. “The overall process of integrating the infrastructure and the network lasted longer than we originally expected,” Delhivery’s co-founder and CEO, Sahil Barua, said in a earnings call in August 2022. Look at the full image for Delhivery, and the integration of ECom Express will be with its own set of challenges. In FY24, Spoton made losses worth £ 24.9 on revenue from £ 230 crore operations. According to the annual report, Delhivery invested £ 1.512 crore in the FY24 enterprise. In February, Delhivery Board of Directors finally approved a resolution to merge both businesses with the parent company. As Incred’s Maitra also said, Delhivery’s acquisition of Spoton has not done well yet. Consider this: Delhivery’s income from the partial truck business dropped from £ 1.692 crore in FY22 to £ 1.546 crore in FY24, while tonnage in PTL Freight tonnage was 1.429 thousand tons, lower than FY22, according to the company’s annual report. This, despite the large space for growth in the delivery business of trucks. In the report cited above, Rederation said that the complete and partial cargo-logistics enterprise is ‘highly fragmented’ with three-fourths of the segment managed by owners of small flea, runoff trucks. “Compared to the B2C-E-Trading Logistics, which is largely organized from FY24, FTL and PTL Logistics invite a limited organized competition with ~ 90-92% and ~ 60-70% disorganized markets, respectively,” the reporting of ECom Express will be accompanied by Spoton Identical is to Delhiver’s core explicit delivery business. With the high burn, there will be some impact on the books. Delhivery will have to cut the cost quickly, “the analyst added. There will be a few quarters on Delhivery’s numbers. Streaming line. Our competitors, and so it is not clear what value we should attribute to those volumes, “Barua said.” It is better to enforce discipline. So, we’ll wait and watch. If the right consolidation opportunity is available at the right price, Delhivery is of course a natural consolidator in the market. But I don’t believe it is necessary to try to force anything at this time. ‘ Two months later, he concluded Ecom Express in an emergency agreement. Look at Full Image Ecom Express’s business quickly haunted a loss of the customer. “It’s interesting to see that consolidation among these players is now happening and not earlier,” Maitra said. “E -commerce logistics were considered a sundector and the financing was relatively easy to achieve. None of the big players were eager to tackle each other.” According to data from the financial research platform Tracxn, Xpressbees and ECom Express collected more than $ 300 million each over various financing rounds with participation of prominent global investors, including PE -Firms Warburg, Blackstone and TPG. offers their ship services to direct brands (D2C) and independent sellers. e, Delhivery has at best about 23-25% of this market (before obtaining Ecom Express), “Maitra said.” But Amazon India and Flipkart have very strong parenting. Both Amazon and Walmart can continue to burn money, “he added. The bigger threat to 3PL providers is existing e-commerce players. First, Amazon, Flipkart and later most brought their logistical operations into the home, which left people like Delhivery and Ecom Express. Amazon (now) and Flipkart (minutes) are both leaving participants in this business that is dominated by Blinkit, Zepto and Swiggy Instamart. D2C brands start offering faster deliveries in major cities. Earlier this year, Delhivery started a pilot for Quick Commerce two-hour deliveries in Chennai, Hyderabad and Bengaluru with two “core customers” and another 15 planning to go directly. The company plans not to set up more than 50 dark stores in each of the top eight metro cities where fast trade grows the fastest. But Barua van Delhivery warned investors in an income in February that it could not become a big money -making segment soon. In one year, Barua said, Delhivery can only logistics for fast trading up to £ 80-100 scale. Ecom Express, together with smaller competitors, including Shadowfax, started erecting rapid deliveries for rapid trade in the groceries last year, the Economic Times reported in August. Ecom Express’s assets for this segment – such as dark stores in the city – can be of value to Delhivery, but it is unclear how many of its warehouses and dark store network the company closed to control costs earlier this year. In the long run, all third -party -B2C -logistics firms will have to think hard about new growths. India’s e-commerce story is modern as it grows; New opportunities for the last kilometer, such as fast trade, may not be as profitable; In home logistics arms can easily take away business from 3PL firms. “In this industry we reach a reckoning in some ways,” Barua told investors in February revenue. ‘The reality is that the incremental flow of capital in this industry will now be severely limited. And I think in the interest of sustaining themselves as a concern, the competition will have to look at their business models. ‘ Delhivery will also have to do the same. Ecom Express is perhaps one of the largest acquisitions, but it may not deliver the business in a more profitable future. Catch all the corporate news and updates on live currency. Download the Mint News app to get daily market updates and live business news. More Topics #Long Read #long Story Mint Specialies