Thursday 9 April 2015

Flipkart and Amazon eye Biyani co

Retail magnate and Future Group founder Kishore Biyani is in talks with e-commerce majors Flipkart and Amazon, among others, to sell a 49% stake in his logistics and warehousing company Future Supply Chain Solutions valued at Rs 2,500 crore, or $400 million, people directly aware of the matter said. 

Biyani, who owns a 71% stake, and Hong Kong-listed global supply chain manager Li & Fung will offload shares in a secondary transaction expected to fructify in the next few weeks. Some private equity investors are also keen on the transaction as logistics market is ripe for deal-making riding on the exponential growth in online shopping. 

Future Supply Chain, which reported around Rs 600 crore revenue with about an 18% operating margin, is already handling e-commerce deliveries for Snapdeal and furniture e-tailer Pepperfry. The company has projected a Rs 850-900 crore revenue figure in the current fiscal as it adds muscle to its e-commerce supply chain platform. 

Biyani's discussion with Flipkart and Amazon is interesting since these e-commerce giants already have their own delivery networks in eKart Logistics and Amazon Transportation Solutions. Recent media reports suggested that Flipkart might be working on spinning off its delivery unit as part of a corporate rejig. While Flipkart and Amazon might be open to alliances or joint ventures on last-mile delivery, it is unlikely to share its core supply chain technology with anyone. 

When contacted by TOI, Kishore Biyani said Future Supply Chain was looking to divest shares or go public going forward however, he declined to share details on the potential deal. Li & Fung had acquired a 26% stake in the company investing $30 million six years ago. India's organized retail pioneer Biyani, who has been critical of the heavily bleeding online business models, has been warming up to the e-commerce juggernauts and last year tied up with Amazon to sell some of his brands. 

Flipkart declined to comment, while an emailed query to Amazon remained unanswered till the time of going to press. 

E-commerce logistics is broken up into three verticals in India—third party logistics companies like Blue Dart and Gati, logistics startups such as Delhivery and GoJavas which was acquired by Snapdeal and delivery networks of Flipkart and Amazon. The logistics sector has seen a rise in investor interest with private equity and hedge funds investing behind Delhivery. Some e-commerce companies have divested or monetized their delivery networks as in the case of fashion e-tailer Jabong.

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