Deal focus: Carlyle backs Delhivery’s cutting edge

India’s e-commerce boom is well underway, with the convenience of online ordering rapidly winning over consumers. But behind the scenes industry observers worry that the logistics sector has failed to keep pace with customer demand for efficient and fast delivery, much less the unique needs of the Indian market.

“You need to provide very high service levels, which traditional logistics companies in India haven’t done,” says Neeraj Bharadwaj, a managing director in the Asia buyout team for The Carlyle Group. “There has been a stronger demand for third-party e-commerce logistics companies for better technology integration and value-added services such as cash-on-delivery and returns.”

Carlyle’s recent investment of more than $100 million in Delhivery, alongside existing backer Tiger Global Management, is aimed at supporting one of the few companies that the firm believes has what it takes to provide logistics services to Indian e-commerce players.

The GP did not jump into its new investment lightly. Delhivery had been in operation for over five years when Carlyle came on board. The GP concluded that the company passed its start-up speed bumps and showed it could be a strong partner for homegrown e-commerce giants like Snapdeal and Flipkart, along with specialists such as furniture merchants and online grocery providers.

Delhivery’s express logistics services network, which spans 600 cities with 12 fulfilment centers, is one of its most visible signs of success. But the company’s backers are more satisfied with its management team’s understanding of the benefits that modern technology can to the sector. For example, Delhivery’s collection of data on shipments and returns gives it unique insights into customer behavior and a marked advantage over its competitors in the logistics space that have not realized the value of this information.

“You sometimes find managers who come from very traditional logistics backgrounds, and they obviously bring very valuable experience,” Bharadwaj says. “But you need to supplement that with a strong grounding in analytics and technology, which is what Delhivery has done. They have both facets of that covered.”

For its part, Carlyle expects to play a crucial role in the company’s continued expansion through its experience in emerging markets e-commerce logistics. In particular, the GP believes its work in China, where the volume of e-commerce shipments is 80 times that of India, will help it to advise its new portfolio company on likely developments in the market.

“India’s 7-10 years behind China in terms of e-commerce, and the experience of supporting our portfolio company ANE Logistics in China has provided us with a better understanding of the transformation of e-commerce logistics,” says Bharadwaj. “You can’t build what China has today because the market’s not there yet, but it does give you a perspective on what you need to build in the future.” 

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• Topics
• South Asia
• Technology
• Expansion
• India
• The Carlyle Group
• Logistics
• Tiger Global Management
• Growth capital