A series of M&A deals involving e-commerce leaders Amazon and Flipkart, freight and logistics firms Nippon Express and Allcargo, and delivery companies Gati and Shadowfax is shaking up India’s highly fragmented logistics and delivery markets.
The deals come as healthy economic growth, increasing domestic consumption and the fast expansion of internet retailing drive growth prospects for the country’s logistics sector. For example, the Indian express logistics industry is expected to reach INR 480 billion (US$ 7 billion) by 2023, according to a study led by Deloitte in 2018.
International express & parcel leaders have already invested significantly in B2B-focused Indian companies. For example, UPS bought full ownership of its local joint venture UPS Jetair Express in 2018, GeoPost previously acquired a minority stake in leading courier DTDC, while DHL has owned Blue Dart for many years.
In parallel, there are several fast-growing but loss-making companies focusing on B2C e-commerce deliveries, such as Delhivery, Ecom Express and Xpressbees, which have attracted substantial private equity over the past few years. Earlier this year, Delhivery made a major expansion move with the takeover of Aramex’s final-mile operations in India after the Middle East-based group decided to quit the competitive domestic market and focus instead on international express shipments to and from the county.
Four separate deals over the last three weeks have now caught the eye.
Indian e-commerce leader Flipkart (now owned by Walmart) has just invested a reported US$ 30 million in delivery start-up Shadowfax, a platform that runs its own warehouses, uses spare capacity in local stores and has some 100,000 crowdsourced delivery workers for final-mile deliveries. This company claims to make more than 10 million deliveries a month already.
Flipkart aims to cooperate with Shadowfax to speed up final-mile deliveries by storing goods closer to customers. The e-retailer already owns Ekart Logistics, which delivers about 10 million shipments monthly, mostly for its parent company but also for other retailers.
In a separate deal, Allcargo Logistics Ltd., which claims to be India’s largest integrated logistics solutions provider, has acquired a controlling stake in Gati, one of the country’s B2B express delivery pioneers. Founded in 1989, Gati delivers about six million packages a month through a road-based nationwide network offering express transportation and deliveries.
Allcargo said the combination of its broad logistics activities with Gati’s domestic express transportation will make it into India’s largest private logistics company by revenue. With this acquisition, Allcargo is also entering into a strategic relationship with Japanese freight forwarder Kintetsu World Express (KWE), which has a joint venture with Gati for express distribution.
“The exponential rise in cross-border and domestic e-commerce has opened up new markets for traditional express players such as Gati. With Allcargo’s existing strength in the ocean transportation business and Gati’s expertise in land and air transportation, we are now in a unique position to offer our customers a suite of truly multimodal solutions,” stated Mr. Shashi Kiran Shetty, Chairman of Allcargo Logistics Ltd.
Gati founder Mahendra Agarwal, who had been seeking “an established strategic partner”, said the alliance between the two companies would strengthen Gati with “more management bandwidth, operational synergies, cross-selling opportunities and financial strength”.
“With this strategic deal with Allcargo Logistics, we have entered a new era of consolidation in the domestic express logistics space. This collaboration also reiterates our commitment to ensure maximum outreach across untapped markets and provide benchmarked last-mile delivery solutions to our clients,” added Mr. Bala Aghoramurthy, Deputy Managing Director, Gati Ltd.
Separately, Amazon has just gained regulatory approval from India’s competition authority to buy a small 3.6% stake in Future Group, one of the country’s biggest retailers with more than 1,500 stores and the budget ship chain Big Bazaar.
Then last week, Nippon Express and Future Group announced that the Japanese freight group will buy a 22% stake in Future Supply Chain Solutions Ltd (FSC), the Indian company’s logistics subsidiary, as part of a strategic alliance aiming to make FSC into India’s leading logistics player.
FSC offers a wide range of logistics services, including warehousing in 90 distribution centres, transportation & distribution through a network of 13 hubs and 132 branches, and last-mile deliveries. In 2018, it took over Vulcan Express, the delivery business of Indian e-retailer Snapdeal.
Under their partnership, the two companies aim to win more international customers for FSC logistics services in India, leverage Nippon Express’ worldwide network for Indian exporters, and improve FSC’s operational performance through new technologies and process improvements.
More M&A deals are expected in India in 2020 as the logistics market continues to grow.
