The company said in a Friday’s fourth-quarter earnings call that Delhivery expects more integration in the delivery ecosystem and that the era of suicide pricing in the market is over.
Sahil Barua, CEO and founder of Delhivery, said the competitor’s positive discounts (which result in price below cost) are no longer sustainable.
“Our expectation is that this pricing is suicide and untenable because its gross margin seems to be negative. I think suicide pricing in the industry is more or less over at this point because most players are seeing the consequences of this discount.”
Delhivery made profits for the first time in fiscal 25, with net profits of ₹Revenue of 726 million increased by 6% year-on-year.
Speaking about ECOM Express trading, Barua said: “I think what this transaction does means that if you are a loss network of Express and don’t have profitability, then merge or exit, it’s an inevitable result.”
He added that the industry is plaguing with too much non-productive and loss-capacity, not only within ECOM Express but also among other players.
Delhivey gains value from rival logistics company Ecom Express in all-cash transactions ₹April 14.07 million. Less than a year ago, Ecom Express was valued ₹70 million. The acquisition is awaiting approval from the Indian Competition Commission, after which Ecom Express will become a subsidiary of Delhivery.
Barua explained that compared with 2021 Spoton logistics collection, ECOM Express’s integration is very different and has less risk. Customers already have almost 100% of customer overlap, and similar processes and systems already exist.
Delhivey acquires Bangalore-based Spoton in August 2021 ₹$16 billion in all-cash transactions. Founded in 2012, Spoton specializes in business-to-business Express logistics services in a variety of fields, including automotive, engineering, pharmaceutical, electronics and lifestyles.
The Ecom Express Handles Express package volume is about 40% of Delhivery, but the freight tonnage is much lower, at about 20%, which simplifies integration.
Very well integrated
Only a few facilities will be retained – which are feasible in places with tight capacity or repurchasing – another highlight is the need for new technology. He also noted that the experienced workforce of ECOM Express is familiar with e-commerce logistics.
He added: “The regular iteration of the Delhivery network itself will provide enough room for us to absorb all qualified employees from Ecomexpress in our operations across the country.”
Barua explained that the purchase price includes ₹$3 billion in integration costs.
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The founders of Delhivey added that lease liabilities with lock-in periods are a key factor in managing integration costs. To manage this, Delhivery plans to quickly reuse these facilities in its network, or negotiate shorter lockdown conditions with landlords and account for all costs.
Barua noted that losses between competitors increased, “There are too many players in this market. Our acquisition of Ecom Express has not changed that dynamic. Our remaining competitors’ similar models to ECOM also resulted in their losses in the fourth quarter.”
Fast business
Last quarter, Barua explained that the fast business model faces inherent limitations in terms of scale and potential, and this time he reiterated that. He also noted that brands typically store only 10-15% of their stock saving units (SKUs) for quick delivery, further reducing market opportunities.
Delhivey’s Rapid Commerce is a logistics service designed to provide ultra-fast delivery within two hours.
Delhivey Coo Ajit Pai explained that as of the quarter, they operated in three cities with about 18 dark stores. Older dark shops have about 350 to 400 orders a day, while new orders are still increasing. He noted that it is still early and they expect this growth to take time. Overall, they plan to have 50 dark stores by the end of the fiscal year.
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Delhivery’s Dark stores require about 700-800 orders per day to go bankrupt, and Pai expects that each store will take about 4 to 5 months to reach that level.
Barua said the company plans to expand into the business-to-business (B2B) category rather than focusing only on business-to-consumer (B2C) customers.
“We now have B2B customers saying they actually want to participate in a faster business form,” he said.
