Deal focus: Xponentia takes delivery of maiden deal

For its debut transaction, Xponentia Fund Partners wanted a company through which it could showcase the capabilities its founding team had developed through their cumulative decades in Indian private equity. The GP settled on Spoton Logistics, a significant player in the national express delivery industry, which it acquired alongside Samara Capital in a deal valued at INR5.5 billion ($78 million).

India Equity Partners formed Spoton in 2012 following a carve-out of Dutch logistics provider TNT Express’ India business. This meant the management team was accustomed to private equity owners, enabling Xponentia and Samara Capital to start work right away on growth initiatives.

“They’re very well-versed in the private equity way, and we expect a robust working relationship focused on opportunities in business development,” says P.R. Srinivasan, a co-founder and investment partner at Xponentia. “As the goods and services tax (GST) makes logistics players more competitive, at some point national-level client companies will choose to work only with national logistics players.”

Spoton is poised to benefit from this shift in demand through its nationwide network of 11 freight hubs and eight depots. The company contracts with independent truck drivers who deliver goods for corporate and small business clients according to a regular schedule. As a result, it can guarantee delivery in a certain timeframe, as opposed to less-than-truckload operators where drivers wait until they have a full load before leaving.

Due to its reliability and reach, Spoton has developed a loyal customer portfolio of more than 4,000 companies despite charging higher fees than its peers. The investors see the segment as relatively safe from disruption because of the substantial investment needed to build momentum.

“Once you have scaled up the network, that creates a strong entry barrier,” Srinivasan says. “There are maybe five companies that can do what Spoton does, and those five will continue to be the main competition, because a new network cannot be created easily. Meeting service standards will require running trucks on schedule whether or not they are filled up and could mean losses for several years.”

Xponentia is currently investing its founders’ capital, but looking to raise a $250 million fund. It will target domestic investors for a $100 million first close before reaching out internationally. Xponentia wants to back companies that can benefit from the experience of its founders, which include Srinivasan, previously head of India at Citigroup Venture Capital International (CVCI), as well as Ajay Relan and Devinjit Singh, formerly of CX Partners and The Carlye Group, respectively. 

“The big PE funds have graduated to the top end of the market, so in the $100 million range there’s a lot of competition. But in the $15-50 million deal space, given our experience and network, we can identify and execute transactions that are very competitively priced,” says Srinivasan.   

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• Topics
• South Asia
• Buyout
• Support services
• India
• Samara Capital
• Xponentia Fund Partners
• Logistics