BENGALURU: Carlyle Asia Partners IV
(CAP IV) has led a $100 million (Rs 655 crore approx) funding round for e-commerce
logistics company Delhivery
for a significant minority stake in the company, reaffirming interests from bulge PE bracket buyout funds who have traditionally stayed away from the domestic consumer internet space.
Existing investor Tiger Global
also participated in the round which values the company at close $700 million (Rs 4700 crore).
Betting on the growing demand from the Indian e-commerce industry and requirement for specialised Service level Agreements (SLA) from logistics partners, this will be CAP’s first big logistics bet in the e-commerce space in India. CAP is also an investor in ANE Technologies in China, and Carlyle Group-backed China Logistics Property Holdings Co launched an IPO in HongKong in August 2016.
Carlyle&s investment in Delhivery will be among the largest PE investment in the space. In July 2015, Warburg Pincus had agreed to invest $133 million in Ecom Express.
"In India, 70% of the e-commerce market is mobile and electronics. If you look at markets worldwide, categories like apparel, home decor, grocery, furniture form a larger share in a mature market. We believe these categories will grow in India, accelerating the need for third-party logistics players. The horizontal players will continue to be the largest players while categories like grocery and furniture will see the emergence of vertical players," said Neeraj Bharadwaj, managing director at Carlyle Group, India.
He added that the group decided to invest in the company based on the scale, technology and its data sciences and analytics capabilities.
Delhivery which began as hyperlocal food delivery startup in Gurugram soon pivoted to became an e-commerce logistics company, ridding piggyback on the online retail boom. It currently services 600 cities and 8500 pin codes through its logistics network. The company also has a network of 12 fulfilment centres and works with companies like Flipkart
. For the financial year ending March 2016, the losses of Delhivery were at Rs 317 crore as compared to Rs 71 crore in FY 2014-15 as sourced by data research platform Tofler while the revenues grew to Rs 495 crore during the same period over Rs 228 crore in the previous year, FY 2015-16.
The company had previously raised $85 million from Tiger Global, Nexus Venture Partners
, Multiples Alternate Asset Management
and Times Internet Ltd
in May 2015. Multiples Alternate Asset Management later sold part of its stake to Tiger Global.
ET in its edition dated February 28 was the first to report about Carlyle closing in on the investment.
Delhivery founded in 2011 has gone on record to say that the company is on the path to profitability in an interview given to ET in October. "We are profitable and it will reflect in our results for fiscal 2018," said Sahil Barua, co-founder of the company.
According to experts tracking the sector, close to 1.4 to 1.5 million packages from e-commerce companies are processed daily in India.
"This is a fraction of the China delivery market where close to 75-80 million packages are shipped daily. As an investor in ANE Technologies, we will share our learning in express deliveries and LTL (less than load, implying small freight) with the company," added Bharadwaj.
While Goods and Services Tax will see a consolidation of warehouses and the transport sector, it will be a good opportunity for Delhivery to increase scale, said Bharadwaj. "I don&t think acquisition is necessary to build scale. As GST comes along and there is consolidation in the market, we as a larger player will absorb some of the business," said Bharadwaj.
Previously Delhivery had invested in last mile food delivery company Opinio
which was acquired by Curefit
earlier this year as well as first-mile pickup service provider Parcelled
which rolled back operations.
Technology-enabled logistics businesses are expected to emerge as the next big market, growing from $1.4 billion in 2015 to $9.6 billion by 2020, according to a report by investment bank Avendus Capital
CAP under Bharadwaj has also become a proactive PE investor having backed Metropolis, PNB Housing Finance, Medanta, in the last 3 years. As of December 31, 2016, the group has invested approximately $1.4 billion of equity in more than 30 transactions in India across all funds. According to industry sources, it has invested the highest amount in 2015 in a single year since setting up its India operations in 2000.
Founded in 1987 in Washington, DC, Carlyle – the world&s 2nd largest PE fund -- manages $183 billion worth of assets, according to its website. Roughly one-third of those assets are managed by its private-equity team.
Last year, the firm had ranked India as the most attractive investment destination in the whole world, offering the highest expected returns on incremental capital over the next 4 years.