Delhivery's ₹1,407 Crore Acquisition of Ecom Express: A Logistics Landscape Shift

The Indian logistics sector is seeing a major consolidation with Delhivery Limited announcing a deal to acquire a 99.4% controlling stake in rival logistics company Ecom Express Limited for a cash consideration of up to ₹1,407 crore ($169.5 million). The all-cash transaction is one of the biggest of its kind in the logistics sector. This acquisition, which has been approved at a Thursday, April 5 meeting of Delhivery's board, marks a significant change in the competitive race.

For Ecom Express, the transaction seems to be a distressed sale; the company last raised private equity at a valuation of about ₹7,300 crore. The current price of acquisition implies a valuations plummeting of about 78% since that most recent fundraise. Ecom Express has had a rough time, leading to its bookending plans to go public this year, as well as controversial layoffs earlier in the year. Earlier, in September, Delhivery had raised an issue over the allegedly misleading numbers in the draft IPO papers of rival Ecom Express.

One of the main reasons behind Ecom Express's woes seems to be the rise of Valmo, Meesho’s in-house logistics unit. Meesho used to contribute a high percentage, over 50%, of Ecom Express' shipment numbers. Meesho's business restructuring was a big challenge for the logistics partner and it was difficult for Ecom Express to replace the loss in business, said Satish Meena, advisor at Datum Intelligence. Total revenue for fiscal year ending 31 March 2024 (FY24) was ₹2,607 crore ($314 million), slightly up from ₹2,548 crore in FY23. Its losses, however, narrowed 40% to ₹256 crore in the same period. Nonetheless, the company's financial position and pressures from the competitive landscape probably set the stage for this acquisition. It had previously looked to go public at a valuation of $700 million and had obtained the Securities and Exchange Board of India (SEBI)’s approval for the IPO. But those plans were eventually put on hold.

The acquisition, according to Delhivery, is to enable scale, efficiency, and better client service through ongoing investments in network automation, electric vehicles, emerging technologies, and R&D. It argues that, "logistics is a scale-driven business where economies of scale result in greater efficiencies that allow players to provide higher quality services at lower prices. MD & CEO of Delhivery Sahil Barua said, "This acquisition will allow us to better serve customers of both companies through continuous investment in infrastructure, technology, network, and people." Moreover, the larger entity would likely enable scale, which would provide increased confidence for investments in assets and R&D, thereby supporting growth of the vendor ecosystem.

As per the terms of the acquisition, which is likely to be completed in the next six months and is subject to the nod from the Competition Commission of India, Ecom Express will be a subsidiary of Delhivery. The firm is expected to be exited by most of Ecom Express's investors, including Warburg Pincus, British International Investment and Partners Group, who together have more than 80% shareholding.

Despite Disappointment For Ecom Express, This Acquisition Could be Positive For Delhivery. While Delhivery's share price slipped 1.80% down on the National Stock Exchange (NSE) on Friday, April 4, the acquisition of a significant player like Ecom Express could greatly enhance its market authority and overall product offer. Deal looks value-accretive for Delhivery, analysts said. But the successful integration of Ecom Express's operations will play a critical role in unlocking the synergies and benefits that this large acquisition was aimed at. This will be a game-changing event in the Indian logistics space, where the power of scale and efficiency matters more now than ever in the battle against competitors.

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