Indian Economy News

Delhivery gets $85 million booster shot

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  • May 6, 2015

Bengaluru: E-commerce logistics company Delhivery has raised close to $85 million in a new round of funding led by venture capital firm Tiger Global Management Llc, giving a fresh boost to the Gurgaon-based start-up that is looking to expand in India and tap international markets.

A top company executive said existing investors Multiples Alternate Asset Management, Nexus Venture Partners and Times Internet Ltd participated in this round as well.

The funds, co-founder and chief executive Sahil Barua said, would be used to expand e-commerce enabling services such as cataloguing, warehouse management and shipping to West Asian and African markets as well as India’s immediate neighbours in South Asia.

The funding, which comes less than eight months after the company raised $35 million in a Series C round, has bolstered the logistics provider’s valuation to $350-400 million, two persons close to the development said on condition of anonymity.

Delhivery will also look at acquisitions in the e-commerce value chain to complete its suite of services, apart from investing in technology.

“We are at an advanced stage of discussion with a few companies in the e-commerce enablement space,” said Barua, suggesting that the company is eyeing 4-5 potential acquisition targets over the next eight months.

Lee Fixel, a partner at Tiger Global, said Delhivery had reached its market-leading position through a combination of innovation and expansion of its logistics infrastructure, fulfilment and transportation services.

Delhivery, run by SSN Logistics Pvt. Ltd, has raised close to $125 million since its inception in 2011. It works with 1,500 online retailers, including Flipkart, Snapdeal, Paytm and Myntra, and 200 offline retailers, providing logistics and last-mile delivery. The company expects to double its Indian presence from 250 cities to 500 by December 2015.

The company has gone in for top-level management hires to bolster its growth plans. It brought on board former FedEx Corp. executive Suraju Dutta and Bain and Co.’s Sandeep Barasia as managing directors.

Dutta, who comes with over two decades of experience, will help Delhivery expand its domestic and international footprint. Barasia will lead Delhivery’s consumer products and services business.

The rapid growth of e-tail in India—expected to touch $50 billion by 2020, according to a report by UBS Securities—has led to a surge of business for and investor interest in allied sectors such as logistics.

The 14 April report by UBS Securities, titled Is India in an e-commerce bubble?, suggested that the revenue pool for logistics service providers, including both in-house and third-party, is likely to grow from under $500 million in 2014 to $5.3 billion in 2020 and $13.7 billion in 2025.

So it’s no surprise that the sector is a hub of activity. Earlier this year, online marketplace Snapdeal, owned by Jasper Infotech Pvt. Ltd, said it would pick up a stake in logistics firm GoJavas. In September last year, Gurgaon-based Ecom Express Pvt. Ltd, founded by former Blue Dart employees, raised close to Rs.75.5 crore.

While speciality e-commerce logistics companies are the flavour of the season, traditional logistics companies such as DHL and FedEx aren’t sitting on the sidelines. In August last year, DHL, owner of Blue Dart, announced that it was investing €100 million over two years on building infrastructure and warehouses, as well as options for delivery and payment, to cater to e-commerce companies.

Some e-commerce firms have launched their own logistics arms, but Anand Ramanathan, director at KPMG in India, believes what is needed is more specialists with the bandwidth to cover the smallest of markets.

“The biggest constraint in e-commerce as we speak is clearly logistics,” said Ramanathan.

India has over 40,000 pincodes that need to be serviced and the top e-retailers service only reach 15,000.

“Supply of logistics has not been in step with demand generated by e-commerce companies,” added Ramanathan.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.