Exclusive: Ecom Express Looking To Raise $167 Mn Through Rights Issue

Logistics startup Ecom Express, which seems to have put its initial public offering (IPO) plans on hold, is looking to raise $167 Mn through a rights issue. 

In an extraordinary general meeting held on September 16, the startup’s board passed a resolution to allot 15,06,028 Series VI compulsory convertible preference shares (CCPS) on a rights issue basis to its equity shareholders. 

Through a rights issue, a company offers its existing shareholders a chance to buy additional shares in proportion to their shareholding at a discounted price.

Last week, Inc42 reported that Ecom Express had received $39 Mn from its existing shareholders – Partners Group, Warburg Pincus, and CDC Group through a rights issue. This $39 Mn seems to be part of the total $167 Mn that the startup is raising. 

Amid the funding boom last year, the logistics startup joined the IPO bandwagon and firmed up plans to go public. Inc42 was the first to report about the startup’s plans to raise INR 4,860 Cr through IPO. The startup’s IPO offer was supposed to comprise a fresh issue of INR 2,160 Cr and an offer-for-sale component of INR 2,700 Cr. 

However, like many other startups which deferred or abandoned their IPO plans due to unfavourable market conditions amid the global economic slowdown, Ecom Express also stalled its listing plans. 

In August this year, Mint reported that Amazon India was looking to buy a majority stake in Ecom Express for around $500 Mn. It has to be noted that Amazon doesn’t have an in-house logistics arm in India, unlike in the US. 

Ecom Express reported a profit of INR 43.4 Cr in the financial year 2020-21 (FY21) as against a loss of INR 313.5 Cr in FY20. Its consolidated revenue jumped 33% to INR 1,627 Cr from INR 1,254 Cr in FY20

In August, Inc42 reported that online pharmacy startup PharmEasy has withdrawn its draft red herring prospectus (DRHP) filed with the Securities and Exchange Board of India (SEBI). PharmEasy’s parent company API Holdings cited valuation mismatch and market volatility as the reasons for deferring its INR 6,250 Cr IPO, and told its shareholders that it was mulling a rights issue to fund its immediate growth and expansion plans.

As per media reports, the startup has floated its rights issue to raise INR 750 Cr through convertible notes. The round will see participation from existing investors Prosus Ventures and Temasek.  

The ongoing Russia-Ukraine war, consequent geopolitical tensions, and rising global inflation have hit not only the public markets but also private markets, leading to what is being called a ‘funding winter’. Indian startups reeling under the funding winter have taken up various measures to cut costs, including laying off employees. As per Inc42’s layoff tracker, Indian startups have laid off over 12.5 K employees in 2022 so far. 

According to Inc42 data, the funding raised by Indian startups declined 50% quarter-on-quarter and 82% year-on-year to $3 Bn in July-September 2022.