Delhivery, the logistics firm, announced that it will acquire its rival, Ecom Express Limited, for a sum not exceeding Rs 1,407 Crore.
“The Board has approved the execution of the Share Purchase Agreement amongst the Company, the Target Company (Ecom Express) and their shareholders and execution of other necessary documents regarding the acquisition above (“Transaction Documents”). After completing such acquisition, Ecom will become a subsidiary of the Company,” Delhivery said in a regulatory filing.
Delhivery also stated that the acquisition would be finalized within six months of executing the Share Purchase Agreement (SPA) unless the parties involved extend it.
This acquisition follows allegations from Delhivery that Ecom Express misrepresented its shipment volumes, profitability, and capacity metrics in its draft red herring prospectus (DRHP) from September last year.
Delhivery clarified that it counts a shipment as a single unit, even if it does not deliver and returns it to the origin. In contrast, Ecom Express treats it as separate shipments since it bills the outbound and return transportation individually.
Additionally, Delhivery claimed that when factoring in the industry average of 14-18 per cent of shipments returned to origin, the adjusted shipment count for Ecom Express would be around 450 million.
It also argued that comparing the shipments of the two companies is inaccurate, as their customer mixes differ, leading to variations in the average weight of shipments.
“Per shipment metrics hugely vary depending on shipment profile – weight profile for Delhivery and peer will be significantly different due to different client mix. Peer has Top customer concentration of 52% of revenue (vs. 16% for Delhivery) resulting in Delhivery’s average weight per parcel being ~2x of the peer,” it said in a regulatory filing.
Delhivery’s acquisition of Ecom Express highlights the ongoing dynamics in the logistics industry, particularly concerning the accuracy of performance metrics. As the deal progresses, it will be interesting to see how the integration unfolds and how these discrepancies in shipment accounting will impact both companies moving forward.
