Chennai-based TVS Logistics Services, PE firm Peepul Capital, and Supply chain firm Gati are looking to acquire Vulcan Express, the in-house logistics arm of Snapdeal. As per sources, the buyout will likely take place within the next two months for an estimated $14.4 Mn – $19.2 Mn (INR 90 Cr- INR 120 Cr).
This report comes only days after Axis Bank expressed interest in acquiring Jasper Infotech’s, FreeCharge, for a rumoured $100 Mn (INR 625 Cr). The digital wallet startup was also in talks with Bank of Baroda, Times Internet, MobiKwik, and Paytm during the period, when speculations about the Flipkart-Snapdeal merger first surfaced.
According to reports, FreeCharge’s newly-appointed CEO, Jason Kothari will be presiding over the Vulcan transaction. Other companies looking to acquire Vulcan Express are ecommerce giant Flipkart and NYC-headquartered private equity enterprise Warburg Pincus.
In a recent interaction with ET, Kothari said, “Vulcan Express has a strong management team and is achieving one of the highest levels of efficiency and service levels in the ecommerce logistics space. We are not surprised by the high level of interest we are seeing in acquiring the business but cannot mention any further specifics.”
The Race ToAcquisition
It was originally reported in April 2017 that TVS Logistics and two private equity firms were holding talks with Jasper Infotech to either acquire or, at the very least, buy a majority stake in Vulcan. In June, media reports about Vulcan being part of the Flipkart-Snapdeal merger also surfaced. Although Flipkart has its own logistics unit Ekart, the merger could provide the 10-year-old online marketplace much-needed access to Snapdeal’s supply-chain network. This would, in turn, help the Kalyan Krishnamurthy-helmed company expand its reach in the ecommerce space.
Founded in 1966, Warburg Pincus currently boasts over $44 Bn in assets across 140 companies in 40 different countries. Its offices are located at the US, India, Europe, China and Brazil. It currently backs three Indian logistics companies, including Mumbai-based Stellar Value Chain, Gurugram-headquartered ecommerce distribution solution Ecom Express, and Rivigo. Its latest move to acquire Vulcan could in turn help boost Rivigo and Ecom Express’ growth.
Established in India in 1989, supply chain and logistics firm Gati later expanded to other SAARC and Asia Pacific countries. Today, it operates in more than 19,000 pincodes across the nation.
TVS Logistics has over 16 years of experience in supply chain and warehouse operations management. In addition to India, the company has been offering its services in Spain, Thailand, Germany, China, the US and the UK. Investment firm Peepul Capital has been navigating the private equity industry since 2000. At present, it boasts over $700 Mn in assets under management.
Vulcan Express: The Journey So Far
Vulcan Express was founded in 2013 as an end-to-end logistics and supply-chain solution for managing Snapdeal’s shipments. This came at a time when Snapdeal had discontinued its contract with third-party ecommerce logistics player GoJavas. In fact, in June 2017, Snapdeal made headlines for filing a FIR against the promoters of Quickdel, the parent company of GoJavas. The firm was alleged of cheating, forgery, conspiracy, criminal breach of trust, and criminal misappropriation of valuable securities.
Currently, Vulcan’s services include transportation, warehouse management, line haul, last-minute distribution, quality control, inventory tracking as well as reverse logistics. Over the years, it has reportedly acquired more than 1 Mn square feet of warehouse space, which is currently used to handle over 250K daily deliveries.
In 2015, Vulcan received $3.75 Mn (INR 25 Cr) from its parent entity Jasper. In August 2016, Snapdeal also opened six new hubs of logistics across Delhi/NCR, Lucknow, Hyderabad, and Kolkata that are currently being operated by Vulcan Express. In March 2017, it announced plans to expand operations to 80 major cities across India. As part of the initiative, the company will start serving new clients, in the B2B (business-to-business) and B2C (business-to-consumer) space.
Speaking about the development, CEO Hardeep Singh stated, “Given the business we are in, we recognised long back that a consistently good consumer experience can only ride on a well-controlled, transparent, and responsive logistics network. Over the last year-and-a-half, we have invested towards solving for every single pain point on each leg of the delivery journey. We are pleased to offer these services to businesses that require them and are aligned with our consumer-centric capabilities.”
Up until now, Vulcan’s operations were primarily focussed on providing logistics solutions to Snapdeal. However, increased losses and high cash burn rate have caused the ecommerce company (once valued at $6.5 Bn) to sink. Most recently, it rejected Flipkart’s $700 – $800 Mn merger proposal. Consequently, both FreeCharge and Vulcan Express stand to lose their current valuations, making their fate wholly uncertain. But with TVS Logistics, Gati, and Peepul showing strong interest in the logistics entity, Vulcan Express seems to be on the fast track to an acquisition.
(The development was reported by ET)