Flipkart to push logistics cart in next growth drive

BENGALURU: Flipkart’s new CEO Binny Bansal is seeking to rev up the company’s growth through the business he knows best, its logistics unit Ekart.

Flipkart is preparing to build out Ekart into an independent business catering to other companies as well, and has started talks with investors to raise capital separately for the logistics unit at a valuation yet to be determined, according to four people familiar with the developments.

The company also recently injected Rs 666 crore (nearly $100 million) into Ekart, regulatory filings show. “Fundamentally, everyone has realised that they have to monetise all pieces of the business,” said a venture capital investor familiar with Flipkart’s plans.

“The move (to hive off Ekart) is also… to cut down cash burn and raise capital in a more stable business, which could be attractive to a different set of investors.” A Flipkart spokesman said: “There is no discussion on the table to either independently value or get external funding for Ekart.”

Over the phone earlier, he confirmed Ekart was scouting for its own CEO. Binny Bansal is currently overseeing Ekart after a restructuring last year.

One of the people mentioned above said Flipkart had started discussions with investors including Russian billionaire Yuri Milner’s DST Global. DST, a stakeholder in Flipkart, is scouting for logistics companies to invest in and has held talks with third-party logistics providers including Delhivery. DST did not immediately reply to an email from ET.

An immediate priority for the marketplace is to get its thousands of sellers to use Ekart’s warehouses, which, in addition to generating revenues from logistics-handling, would ensure smoother in-house deliveries.

Last year, Flipkart significantly expanded its warehousing space. Flipkart is also building an endto-end distribution network that will cater also to brick-and-mortar consumer goods, electronics and apparel firms, according to the people mentioned earlier, all of whom declined to be identified.

It is in discussions with companies including Hindustan Unilever, Procter & Gamble and Adidas to handle logistics for them, a move these people said would translate into better utilisation of Ekart’s capacity in lean periods. Flipkart is in talks with investors to raise about $1.4 billion for its main ecommerce business, ETreported on January 7.

Investors have poured more than $3 billion into Flipkart and own at least 80% of the company, which is now registered in Singapore. But fundraising has not been easy as global headwinds coupled with hypercompetition in India has forced investors to step back.

Ekart currently handles around 3.25-lakh deliveries a day, according to industry sources. Around 75% of Flipkart’s deliveries are handled by the unit.

Ekart has outlined plans to spend $500 million to build 50-100 delivery centres over the next five years, half of these in small towns and cities. Growing the logistics business has become the new buzz at Flipkart. Binny Bansal told employees that logistics would be the frontier of growth.

The challenge will be to enlist outside clients, experts said, as large ecommerce companies have their own logistics units or work with other third-party companies.

Which is why Flipkart is looking to work with apparel, electronics and consumer goods companies for distribution, they said. Experts tracking the logistics industry said there is precedent of conglomerates like TVS Group and Mahindra Group building specialised logistics units for their auto businesses.

TVS Logistics and Mahindra Logistics have become independent companies, raising capital from private equity investors KKR and Kedaara Capital, respectively.