Rivigo deal will triple our express delivery biz, says Mahindra Logistics MD
By Team Startupcity | Thursday, 29 September 2022, 08:58 IST
Mahindra Logistics managing director Rampraveen Swaminathan said the Rivigo deal will help the company nearly triple its express delivery business to more than Rs 500 crore in a year.
The business-to-business express delivery operations of Rivigo, which it is acquiring, will form a significant portion of Mahindra Logistics’ business. The third-party logistics company of the Mahindra Group had reported consolidated revenue of Rs 4,083 crore in the last fiscal year.
“So, while the press has reported about Rivigo's financial problems, we actually believe that service quality metrics are good, unit margins are positive, and revenue yield per kilo or tonne is good,” Swaminathan said. “Some elements of the P&L (profit and loss account) are favourable. The business overall has been losing money largely on the account that it has been sub-scale.”
In combination with Mahindra Logistics’ operations, Rivigo’s B2B express parcel service could gain the required scale to make the business profitable at the unit economics level, said Swaminathan, who is also its chief executive.
Mahindra Logistics on Monday said it would acquire Rivigo’s B2B express delivery arm, which is about half of the startup’s business, for Rs 225 core in a slump sale. Under the agreement, Mahindra Logistics will acquire the division’s customers, teams, assets, technology platform, and the overall brand.
Swaminathan said integration with Rivigo wouldn’t exactly be “plug-and-play” and that it would take up to 12 months to move to a single technology platform for the combined entity.
“A very important tenet is to ensure that service delivery and quality remains strong,” he said. “The B2B express business by definition is a customer who wants a time-defined service. They are coming to you because you are providing a time-defined service with high-quality performance. You start messing that up, you lose credibility.”
Recently, new-age logistics company Delhivery faced multiple issues after acquiring Spot-on, which resulted in its losses widening for the quarter ended June 30.
For Mahindra Logistics, the express parcel B2B business is one of the fastest growing within the company, as it is focussing on diversifying away from the line-haul full-truck load business.
As a part of the slump sale of Rivigo's express B2B business, around 1,300 people will move from Rivigo to Mahindra Logistics. These are largely feet-on-the-ground executives operating Rivigo’s different hubs. Swaminathan said he is not expecting any layoffs as a part of the deal.
Rivigo had held talks with ecommerce marketplace Flipkart, and omnichannel baby product retailer FirstCry for a potential sale. The company had ambitions of raising a funding round and even wanted to go public, but the global macroeconomic headwinds made it difficult for late-stage startups to raise funds.
Rivigo still has its full-truck load business, which it operates in an asset-heavy model, and has around 1,000 trucks on its books.
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