Delhivery Seeks CCI Nod For Ecom Express Acquisition

SUMMARY

The companies argued that the proposed transaction will not lead to any change in “competitive dynamics” or cause “any appreciable adverse effect on competition” in the sector

However, the applicants conceded that there were “horizontal overlaps” and “vertical relationship” between the two companies in certain segments of the logistics space

Earlier this month, Delhivery informed the bourses that it would acquire 99.4% stake in Ecom Express for INR 1,407 Cr, an 80% discount from INR 7,300 Cr at which Ecom Express was last pegged

Weeks after Delhivery announced plans to acquire a controlling stake in Ecom Express for INR 1,407 Cr, the companies have moved the Competition Commission of India (CCI) to seek approval for the deal.

In a notice submitted to the regulator, the companies said that the proposed transaction will not lead to any change in “competitive dynamics” or cause “any appreciable adverse effect on competition” in the logistics sector.

“At the outset, it is submitted that the relevant products and geographic markets can be left open, given that the proposed transaction will not lead to any change in the competitive dynamics, let alone cause any appreciable adverse effect on competition, in any market in India,” read the notice.

However, it said that there are “horizontal overlaps” between the two companies in the “logistics services”, “express parcel delivery services” and “warehousing and supply chain services” markets.

The application also noted that the two parties share “vertical relationship” in the “intralogistics automation services” and “logistics services” (at the downstream level) markets in the country.

Arguing that the proposed acquisition falls under Section 5(a) of the Competition Act, 2002, the applicants noted, “The proposed transaction reflects the Indian economy’s continuous requirement for improvements in cost efficiency, speed and reach of logistics. The proposed transaction will enable the parties to service their customers better, through continued investments in infrastructure, technology, network and people”.

Section 5 of the Act specifies criteria such as the total assets or turnover of the merging companies to determine if a combination needs regulatory approval.

Earlier this month, Delhivery said it would acquire a 99.4% stake in Ecom Express in what was touted as a “fire sale”. The INR 1,407 Cr price tag was a steep 80% discount from INR 7,300 Cr at which Ecom Express was last pegged in June 2024.

What Went Wrong For Ecom Express?

The announcement of the deal came out of the blue as Ecom Express was mulling an INR 2,600 Cr public listing on the stock exchanges. So, what went wrong for the company?

It started with the demise of Ecom Express cofounder and CEO TA Krishnan in 2023. What followed was an exodus of the company’s top-level leadership even as the company brought in new CEO Ajay Chitkara, a former Airtel Business executive with no prior experience in logistics, to helm its operations.

The final blow came after Meesho, which accounted for half of Ecom Express’ revenue, launched its in-house logistics vertical Valmo in February 2024. This dried up orders for the company.

Earlier this year, Ecom Express’ clients like Reliance and Amazon also significantly reduced their orders and the company’s top line took a massive hit. Delays in deliveries to customers, delivery fraud and an overall sub-par customer experience at Ecom Express further added to the problems.

On the other hand, Delhivery sees the acquisition as a way to improve its scale and shore up profitability.