Delhivery got Ecom Express for a song. Will it pay off?

In acquiring Ecom Express, Delhivery has gotten itself a sweet deal. At Rs 1,407 crore, Delhivery has bagged its smaller rival at an 80 per cent discount to its peak valuation of Rs 7,000 crore!

While the cut-price price tag is eye-catching, a critical question still remains. Does this bargain justify the value Ecom Express brings? That's a question D-Street should seek an answer to before ruling out the deal as a sound investment.

But first, what caused Ecom Express' valuation to plummet?

In one word, Meesho. Ecom Express relied on Meesho for over 50 per cent of its business. And this quickly became a vulnerability. In February 2024, Meesho launched its in-house logistics arm, Valmo, which scaled rapidly within months. By December 2024, Valmo was already handling more than half of Meesho's daily orders across over 15,000 pin codes.

This was a huge blow to Ecom and the fallout has been visible in its slowing revenue. The company reported Rs 1,912 crore in revenue for the first nine months of FY25. When we annualise this, the estimated full-year revenue comes to around Rs 2,500 crore, down nearly 4 per cent from FY24. Even the growth for the preceding year (FY24) was unimpressive at just 2 per cent. Adding to the pressure has been a broader slowdown in the e-commerce market with a drop in shipment volumes as inflationary pressures weigh on consumer sentiment.

With these issues, Ecom Express certainly didn't deserve a price-to-sales ratio of 3 times when competitors like Blue Dart and Delhivery, with diversified and profitable operations, were trading at lower multiples of nearly 2 times each.

What Delhivery gains

It's natural to wonder why Delhivery is buying a loss-making business with such skewed concentration towards a single client.

But the decision to acquire Ecom Express stems from sound strategic logic. Logistics is a scale-driven business, where greater volumes lead to higher efficiencies and increased shipment density reduces the cost per shipment, improving margins through operating leverage.

With Ecom Express in its kitty, Delhivery will likely gain on all these fronts. Ecom is the second-largest player after Delhivery, with a 27 per cent share in the B2C e-commerce third-party logistics market. It boasts the widest geographic coverage in the industry, reaching over 27,000 pin codes and 97 per cent of the Indian population, as per MapMyIndia . Now, Delhivery will command 56 per cent of the market supported by the wide footprint of its key competitor. In short, buying out Ecom will likely help the company gain higher shipment volumes, better operational leverage and margins.

The risk that could undermine value creation

However, despite the immediate tailwinds, Delhivery must consider a major risk that could undercut the acquisition's long-term potential: Ecom's overreliance on Meesho, a dependency that already caused a significant erosion in its valuation and can hit the business even harder going ahead.

Not just that, Delhivery itself faces a looming challenge as most e-commerce players like Meesho are increasingly building and expanding their own logistics arms. The share of shipments handled through in-house logistics by e-commerce platforms has already grown from 50 per cent in FY22 to 56 per cent in FY24.

This upward trajectory signals a clear trend: e-commerce giants are steadily reducing their reliance on third-party logistics providers. These companies can also sustain their current cash burn for another decade, allowing them to build the infrastructure necessary to handle their logistics internally. This will likely leave third-party logistics players fighting for a shrinking pie. Against this backdrop then, the acquisition of Ecom Express makes sense only if Delhivery can diversify its clientele. If not, the return on investment will simply not be enough.

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