Ecom Express Acquisition by Delhivery Highlights Industry Challenges

Ecom Express has recently made headlines following its acquisition by the publicly listed company Delhivery for Rs 1,407 crore, which has been perceived as a distress sale. A review of the financial data for the first three quarters of FY25 reveals a decline in revenue, accompanied by an increase in losses.

According to an internal document examined by Startup Superb, Ecom Express recorded operational revenue of Rs 1,912 crore within the first three quarters of FY25. In comparison, the company achieved Rs 2,653 crore in total revenue for the entire fiscal year FY24. Based on the current trend, Ecom Express is anticipated to close FY25 with approximately Rs 2,500 crore in revenue or possibly lower, especially considering the efforts involved in the acquisition.

The stagnation in growth over the last three years likely played a role in the relatively modest valuation of the acquisition.

Ecom Express Logistics Services Overview

Ecom Express asserts that it offers logistics services across 2,700 towns and 27,000 pin codes throughout India, supported by a workforce of over 50,000 employees and 3,000 facilities. In the first nine months of FY25, the firm reported earnings of Rs 2,349 crore from courier services and an additional Rs 260 crore from warehousing operations.

The document states that Ecom Express successfully delivered 40.5 million shipment orders during the first three quarters (March to December 2024), a drop from 51.4 million orders in FY24.

Financial Performance and Losses

The combination of declining revenue and fixed costs has led Ecom Express to experience a net loss of Rs 398 crore in the first nine months of FY25, compared to a loss of Rs 249 crore for the fiscal year ending March 2024. Nevertheless, its adjusted EBITDA loss was recorded at Rs 104 crore in the first nine months of FY25.

Prior to the acquisition, Ecom Express had raised over $290 million in funding. According to the Draft Red Herring Prospectus (DRHP) filed last August, Partners Group was the major stakeholder with 49.76%, followed by Warburg Pincus and BII (British International Investment), holding 27.13% and 10.03% respectively.

Challenges Faced by Ecom Express

The discounted sale of Ecom Express highlights the significant challenges inherent in managing a large logistics business, particularly the considerable manpower management required. Unlike food delivery companies that can tolerate higher attrition rates, logistics firms necessitate a certain level of stability to ensure efficient operations. The nature of logistics can often lead founders to be heavily involved in daily tasks unless they develop a reliable second-tier leadership team.

Ecom Express appears to have made considerable advancements in this regard, boasting a strong leadership team. However, factors such as the maturation of the industry, more cautious valuations, a low promoter stake (with two original promoters having passed away), and the advancing age of the remaining founders (Manju Dhawan and K Satyanarayana) — both former members of Blue Dart with over 35 years of experience — likely contributed to the situation. For these founders, the journey to becoming entrepreneurs has been rewarding and marks a significant milestone in just 13 years since the establishment of the firm in 2012.