It is raining money in the e-commerce logistics businesses in India. If last year saw e-commerce logistics businesses inking 12 deals in India that enabled them to raise $100.28 million, nine deals have been signed in the first six months of 2015 in total, raising $3000.26 million.
Delhi-based Ecom Express is the latest one to join the million dollar club. The e-comm logistics company this month raised Rs 850 crore in fresh funding from the Indian arm of global private equity firm Warburg Pincus.
“The most important aspect that investment companies look at before investing in an e-comm logistics company is how quick and good is the management in solving operational problems through technology. We look at whether the company’s management uses its manpower or technology in delivering,” said Ritesh Banglani, partner, Helion Ventures, an India-focused venture fund based in Mauritius.
Ecom Express isn’t the only darling of investment firms. In May this year, Gurgaon-based SSN Logistics, which runs Delhivery, raised $85 million in a series D round of funding. Led by Tiger Global Management, existing investors, including Multiples Alternate Asset Management, Nexus Venture Partners, and Times Internet, also participated.
This is the company’s fourth round of funding that came less than eight months after its series C round. In its third round, the company raised $35 million, which was led by Multiples Alternate Asset Management in September 2014.
For Sahil Barua, CEO, Delhivery, who started his company with Rs 60 lakh, it hasn’t been difficult to raise money. “We have always been a cost-effective company and that has worked in our favour. Moreover, we are now trying to bring down the cost of delivering per box from $2 to 55 cents,” he said. Delhivery, which on a regular day delivers 1,10,000-1,50,000 parcels, claims that during festive season or during long period of sales the volume of order grows four-fold.
To be sure, much of the funds is used to expand the business. As per Krishnan, CEO, Ecom Express, the infusion of capital will help to expand delivery footprint in tier 3 and 4 towns, apart from rural centres across the country.
“Besides this, we plan to invest in technology, deploy advanced parcel sorting system, strengthen network reliability and infrastructure and finally build the second level management team,” he said.
For the record, the company provides services in more than 2,800 pincodes through more than 320 delivery centres in about 210 cities. It expects to handle about 50 million packages this year.
Barua’s Delhivery, which currently provides service to 3,000 pincodes and will have 555 offices across the country by the end of this year, plans to add 400 more cities to its network. “Additionally we will be building nine fully automated transportation centres and 20 fulfillment centres,” he added.
Similarly, Pristine Logistic, set up by Rajnish Kumar and Amit Kumar, both former Indian Railway Traffic Services employees, is in the process of building private freight terminals at various locations, including Kanpur, Ludhiana, Patna, Cuttack and Indore, which would make it easier for e-comm companies to deliver their goods. “With limited air cargo capacity, which restricts the delivery business, especially in the peak season, we thought of building a logistics business that uses railways efficiently,” said Rajnish Kumar, promoter and founder director of the company.
Early this year, the company received a $25-million investment from UK-based Commonwealth Development Corporation (CDC).
However, not everyone is able to chalk out a survival plan. Delhi-based startup Santa Claus Couriers, which operated Chhotu.in, shut shop in 2013 for lack of funds.
The company, which was launched in June 2011, provided last mile delivery solutions before it dried out of funds.
Pragya Singh, associate vice-president, retail, Technopak Advisors, points out that just like its big brother, the e-comm logistics business is India is at a stage where the industry is expected to witness the launch of a startup almost every week or month. “While some are able to woo investors with their smart business plans, a few fizzle out in the process. Small ones will get bought out by large fish in the future, but before that happens we can expect many interesting models to be launched in the e-comm logistic business,” she added.