Future Group, India’s largest retailer, is said to be in talks to buy online retail platform Snapdeal’s logistics arm Vulcan Express for about Rs 50 crore in an all-cash deal.
Vulcan Express, which manages about half of Snapdeal’s deliveries and shipments, replaced gojavas as the primary logistics partner when it was formed about three years ago. The company, currently operational in more than 100 cities, offers logistics and supply chain solutions for retail and consumer companies, which could help Kishore Biyani’s wider strategy of integrating Future Group’s digital and brick-and-mortar retail businesses.
“It will be a distress sale and the final valuation could be less than Rs 50 crore. The contours of the deal, including the size and through which company it will be done, are still being worked out,” said people aware of the development. Snapdeal and Future Group didn’t respond to email queries sent to them.
A fortnight ago, Biyani-owned Future Supply Chain raised Rs 650 crore by listing on the stock exchanges. The decade-old company caters to clients across consumer, food and beverages, ecommerce and electronics and gets about 63% of its revenue from group entities. At present, Future Group’s technology integration, internally called Retail 3.0, is being piloted by making several Easyday stores a marketplace, giving consumers access to the company’s entire inventory through the digital medium.
While 98% of retailing in India takes place at physical stores, Future Group has been investing in technology, artificial intelligence and creating supporting infrastructure such as last-mile delivery for online sales. With 44 distribution centres covering 4 million square feet of space and 105 branches servicing 11,228 pin codes in the country, Future Supply Chain is already one of India’s largest third-party logistics and supply chain firms.
In comparison, Vulcan Express provides logistics services, including warehousing, transportation, last-mile distribution and reverse logistics as well as quality control and refurbishment of goods, for Snapdeal, smaller retailers and high-value product sellers such as cosmetics firms.
Snapdeal, the country’s third-largest etailer, began shedding noncore assets and services almost a year ago, including digital wallet subsidiary Freecharge, which it sold for Rs 385 crore to Axis Bank. India’s logistics industry, excluding rail freight and port handling, is currently estimated to be worth about Rs 7.5 lakh crore, with organised companies accounting for 12% of the market and the remainder with small, local players.
“This has deprived the user industry from the benefits of scale in the form of efficient, seamless services with optimum use of automation and technology. However, a shift is happening towards organised sector and policy enablers like implementation of GST will further boost the process with change in supply chain towards larger warehouses and longer lead distances, making it difficult for small players to manage. Larger scale will further allow use of technology and automation with rise in scale of operations,” Prabhudas Liladhar, a brokerage firm, said in a recent report.
