[What The Financials] Mahindra-Backed Logistics Startup Porter Sees Losses Grow 151% To INR 104 Cr

While Indian businesses across sectors saw the Covid-19-induced lockdown pinch their performance, those engaged in providing solutions for logistics, mobility and hospitality saw their revenues take a much severe hit, one that has forced them to rework their paths to profitability and put plans for an initial public offering (IPO) on the backburner. 

But it is to be noted that the financial performance for some of these companies was already subpar, even before the impact of the pandemic-induced financial disruption was felt from late-March 2020 onwards. Last month, Inc42 reported that Mahindra-owned Indian cab aggregator Meru Cabs had seen its losses widen by 198% year-on-year (YoY) for the fiscal year 2019-20 (FY20), ending March 31, 2020. 

This month, the corporate affairs filings of another Mahindra-backed enterprise, intra-city logistical solutions provider Porter also reveal a worrying financial picture. For Porter, FY20 saw losses grow by 151%, from INR 41.4 Cr in FY19 to INR 104.1 Cr in FY20.

The increase in the company’s losses came about even as revenue climbed by 99% to INR 275.79 Cr in FY20. This was because, during the same period, the company’s expenses grew by 111%, from INR 180 Cr in FY19 to INR 379.89 Cr in FY20. 

A breakdown of the company’s expenses reveals a huge increase in spending across categories. Operational expenses more than doubled; employee benefit expenses grew by 71%; finance costs by 258%; depreciation costs by 3,366%. Other expenses, which includes the company’s spending on fuel, transportation, advertising, rent, repairs, legal, and recruitment spends, among other such expenses, also increased by 128%. 

Founded in 2014 by IIT alumni Pranav Goel, Uttam Digga and Vikas Chaudhary, Bengaluru-headquartered Porter claims to be a leading player in tech-enabled intra-city logistics. The company looks to provide customers with economical, efficient and reliable logistics solutions. Users can book vehicles ranging from a two-wheeler to a mini-truck through the Porter website or mobile application. The startup claims to be helping ecommerce players, fast-moving consumer goods (FMCG) companies, small and medium enterprises (SMEs), traders, courier, cargo companies optimize their logistics with the help of a dedicated fleet and in-house technology.

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Porter’s clients include ITC, Flipkart, Amazon, Furlenco, Delhivery, Aramex, Urban Ladder, Pepperfry and Parle Agro. 

The startup claims that it allows its delivery partners to enjoy flexible working hours, better earnings and effective work-life balance by choosing how many deliveries they can fulfil, along with perks such as discounted insurance and fuel costs. As of April this year, Porter claimed to have facilitated 3.5 Mn deliveries. 

The company has a presence in six cities, namely Ahmedabad, Mumbai, Delhi-NCR, Chennai, Bengaluru and Hyderabad, but plans to expand its services to 15 other cities including Pune, Kolkata, Ahmedabad, Chandigarh, Jaipur, Lucknow and Coimbatore over the next few years.

Impact Of Pandemic Not Clear For Porter

The onset of the pandemic in India from late-March this year — when the Indian government announced a countrywide lockdown to arrest the spread of the Covid-19 coronavirus — was felt by businesses across sectors. Disruptions to supply chains for most businesses became common, and revenues for these engaged in providing logistics, mobility and hospitality services plummeted. However, Porter’s financials, which are for the period between April 1, 2019, and March 31, 2020, wouldn’t reflect the impact of the pandemic on the company’s business. The same is mentioned in the recent financial filings. 

“The impact (from the pandemic) may be different from that estimated as at the approval of the financial statement and the company will continue to closely monitor any material changes to future economic conditions,” reads a passage in the filings. 

“Company In Stabilisation Phase”

As for Porter’s worsening financial situation, the filings mention that the company is in the “stabilisation phase” and that its ability to continue is dependent on establishing profitable operations and obtaining continuing financial support from its investors. 

The filings add that after the end of FY20, certain investors have infused funds worth nearly INR 140 Cr, utilising which, the company is confident of meeting its operating and capital requirements. 

In April this year, an exclusive Inc42 report revealed that Porter had raised INR 140 Cr in a Series D round, from London-based private equity firm Lightstone. 

The merger of Porter’s operations with that of Orizonte Business Solutions Limited, a wholly-owned subsidiary of Mahindra and Mahindra Limited, was approved by the National Company Law Appellate Tribunal (NCLAT) in April last year. The management expects that the merger would result in synergising both companies’ operations and lead to a reduction in operating costs, thus helping the company stitch a profitable business going forward.

In February 2018, Mahindra Group-owned logistics marketplace SmartShift (Orizonte) had entered into a deal to merge operations with Porter. For this arrangement, Mahindra had invested $10 Mn in Porter. Prior to this, Porter had raised $5.5Mn in Series A round of funding from Sequoia Capital, Kae Capital and other investors in 2015.

In the Indian logistics industry, Porter competes with other startups such as Blackbuck, Delhivery, Locus, Locanix, ElasticRun, and 4tigo Network Logistics. The Indian logistics sector is expected to touch a valuation of $215 Bn this year. Although, the impact of the pandemic may cause the industry to fall short of that potential market size.