Leading logistics player Delhivery could become the newest entrant to India's unicorn club if it manages to land the investment deal being hashed out with SoftBank Group Corp, the world's largest technology investor.
People aware of developments told The Economic Times that SoftBank Vision Fund is set to invest an estimated $350 million (about Rs 2,500 crore) in fresh capital into Delhivery, India's largest e-commerce-centric logistics company by revenue. The Japanese conglomerate reportedly hopes to increase its stake in the startup through secondary transactions, estimated at $100 million.
Talks for this $450 million investment are reportedly in the final stages and a formal announcement is expected next month. The transaction is expected to value the Gurgaon-based startup at over $1 billion. That's a 25 per cent jump in valuations since its previous funding round in March last year, which saw the entry of bulge-bracket investor Carlyle Group.
According to the daily, as part of the secondary exits, the company's founders are likely to pare holdings substantially. Delhivery was founded in 2011 by Sahil Barua, a former Bain and Company employee along with Mohit Tandon, Suraj Saharan, Bhavesh Manglani and Kapil Bharati. Sources claim that the upcoming deal will see the founders cash out and get new stock options at a strike price equal to 15 per cent of the price per share in the latest round.
Delhivery's other current investors include China's Fosun International, New York-based investment firm Tiger Global, Nexus Venture Partners and Times Internet. If things go to plan, SoftBank will emerge as the single largest shareholder with a 32 per centstake while Carlyle will control 11 per cent.
Since inception the startup has raised an estimated $260 million, making the current round in the works its largest by far. The development follows reports that it has decided to postpone plans for its anticipated $350 million initial public offering (IPO).
In the meantime, the company has managed to improve its financials. According to regulatory filings with the Ministry of Corporate Affairs, in the financial year ended March 2017, Delhivery's losses narrowed by nearly 49 per cent year-on-year to Rs 249 crore, while revenue rose to Rs 751 crore from Rs 523 crore.
The funding round will help Delhivery better take on the biggies in the business, namely Flipkart's Ekart and Amazon's ATS, which already control 50 per cent of the market collectively and are investing heavily to scale up further. The dipping share of third-party logistics (3PLs) partners in overall e-commerce shipments further complicate matters.
According to consulting company Redseer, the share of 3PLs has dropped from 55 per cent in 2015 to 45 per cent in 2017, and may fall further to 40 per cent in 2020. Hence, players like Delhivery have been trying to expand services that cater to bigger and more lucrative enterprise or business to business (B2B) logistics, the daily added. For the moment though e-commerce shipments still account for 75 per cent of the company's revenue, posting a 40 per cent jump year-on-year to 12 million shipments a month.
If the talks are fruitful, this will be SoftBank's second fresh investment in India following the $238-million investment in online insurance aggregator PolicyBazaar in June. In addition, the investor is reportedly looking to plough a part of the hefty profits it made on its recent Flipkart exit into baby and mother care portal FirstCry. In September, SoftBank had led the $1-billion funding round in hospitality firm OYO, which had catapulted it into the unicorn club.
(Edited by Sushmita Choudhury Agarwal)