A lot can change in 6 months in the business world.
After alleging that Ecom Express was misrepresenting its numbers in its DRHP filing, Delhivery has now gone ahead and acquired the company. Delhivery’s board has approved the acquisition of Ecom Express at a price not exceeding Rs. 1,407 crore. The acquisition will be completed within 6 months from the date of execution of Share Purchase Agreement (“SPA”) unless extended by both parties.
“The Board has approved the execution of Share Purchase Agreement amongst the Company, the Target Company (Ecom Express) and their shareholders and execution of other necessary documents regarding the aforementioned acquisition (“Transaction Documents”). Post completion of such acquisition, Ecom will become a subsidiary of the Company,” Delhivery said in a regulatory filing.
This move comes months after Ecom Express had looked to go public, and had even released its DRHP in September last year. Delhivery, though, had taken issue with how Ecom Express had compared its own numbers with that of Delhivery’s in its IPO documentation. Delhivery had alleged that Ecom Express has misrepresented numbers with regards to the two companies’ shipment volumes, profitability and capacity metrics.
Delhivery had said that it counts a shipment — even if it is not delivered to the destination and returned to origin — only a single shipment. But, Ecom Express counts it as two shipments as the to and fro transportation are billed separately. For this reason, Delhivery’s FY24 shipment volume of 740 million was not a like-to-like comparison with Ecom Express’ 514 million.
Delhivery had written to the stock markets about this, and said that when accounted for an industry average of 14-18 percent of shipments being returned to origin, the adjusted shipment number for Ecom Express would be in the vicinity of 450 million, which would be significantly below Delhivery’s own numbers.
Ecom Express, meanwhile, had found that business conditions had changed since its IPO plans. Ecom Express got 50 percent of its delivery orders from Meesho, which was its biggest customer. But after Meesho began using its in-house logistics company for deliveries, Ecom Express found that its business shrunk rapidly. In February, Ecom Express had laid off 500 employees, and shut down many of its warehouses. It had stopped coverage of more than 3,000 pin codes, and had begun the process of closing over 1,000 delivery centres and 20 major hubs. It had also paused its IPO plans.
It appears that Ecom Express has now chosen to be acquired by Delhivery, which had accused it of inaccurately comparing its numbers with its own in its IPO filings. This appears to be a distress sale for Ecom Express, given how the company had raised Rs. 2,077 crore from investors including Warburg Princus and CDC Group, but will now be acquired for a mere Rs. 1,407 crore. Ecom Express had been founded all the way back in 2012, but it appears that after 13 years of building the company, and getting within sniffing distance of an IPO, it hasn’t quite got the outcome its founders would’ve hoped.