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In this week’s newsletter, we’ll learn:

1. Why Delhivery bought its rival for ₹1,407 Cr.

2. How information ratio can be used in markets & life.

Market Kya Keh Raha Hai Sir?

India’s most significant integrated logistics player, Delhivery, just acquired its close enemy Ecom Express for ₹1,407 Cr. But, last year, Ecom Express tried to IPO for ₹7,400 Cr! How did Ecom Express's fortunes change so drastically?

To this, worried investors sent Delhivery’s stock down 10%. So, why did Delhivery buy Ecom Express, and why are analysts calling it a bold move?

Let’s unpack the twists, the numbers, and what this means for India’s logistics game.

What’s up with Ecom Express

Founded in 2012 by former Bluedart employees, Ecom Express specialises in e-commerce logistics for platforms such as Zivame, Meesho, and Marks & Spencer.

The Opportunity

Ecom Express placed a big bet on India’s young e-commerce market. In 2023, online retail still accounted for just 6% of total retail spending in India, compared to 35%+ in China. That gap meant growth.

It raised $324 million over 12 funding rounds, anticipating annual growth of 20–30%, especially from tier-2 and tier-3 cities.

The bet looked sound, more consumers were moving online, and more brands and marketplaces were stepping in to serve them.

Ecom Express wanted to capitalise on this opportunity by going public.

The IPO Flop

In August 2024, Ecom Express filed for a ₹7,400 crore IPO. The company reported 20% revenue growth and a 26% rise in shipments over the previous year. It needed fresh capital to expand its expensive logistics network.

However, investors pointed out inconsistencies, such as claims of 27,000 PIN codes in a country that only officially has 19,300. By the end of the year, Ecom Express had shelved its IPO plans due to mounting business challenges.

What finally killed Ecom Express?

Its biggest opportunity became its biggest threat as focused clients turned into rivals and the industry changed character.

Meesho’s Problem

Ecom Express grew by serving major e-commerce platforms, but that became a risk. With most of its revenue tied to a few big clients, losing one could cause a sharp drop.

That’s exactly what happened as Meesho decided to internalise its logistics by launching Valmo, its delivery network. It switched from relying on a single partner like Ecom Express to coordinating multiple third-party providers through its in-house system.

The impact was brutal. Meesho accounted for nearly 50% of Ecom’s revenue. By FY24, Ecom’s shipment growth fell to just 10% (down from 26% a year earlier), and revenue growth slowed to 2% (down from 22%).

Industry Problems

The broader logistics sector was also feeling the pressure. India’s private consumption as a percentage of GDP is dropping, to 55% in FY23 from 58% in FY21. People are spending less on e-commerce platforms now.

Logistics companies felt the blow. Delhivery’s express parcel business grew just 12% in FY24 from an average of 37% in the last 4 years. Quick commerce is taking over key categories like grocery, FMCG, and electronics, pulling demand away from traditional e-commerce.

Ecom Express’ Handling of The Problem

Ecom Express tried to recover. It aggressively cut costs by firing 500 employees and shutting down over 3,000 PIN codes and 1,000 delivery centres.

But it wasn’t enough. Net losses amounted to almost ₹250 Cr in 2024.

Losing a few per cent of revenue is recoverable. But losing Meesho? That’s a different battle altogether. One Ecom Express couldn’t win.

Delhivery comes to the rescue.

The acquisition was finally done at an 80% discount to Ecom Express’ valuation last year. Delhivery got a great deal. Ecom Express was no joke, as it had a 55-60% market share in the B2C express segment.

Nearly 3x that of its nearest competitors.

The deal gives Delhivery access to deeper networks, especially in tier-3 and tier-4 regions. Ecom efficiently delivered low-value parcels (under ₹350) at scale for Meesho.

Merging the two networks could cut duplicate costs, which could help rates without hurting margins.

Strategic Move, Not Just Rescue

Unlike Ecom Express, Delhivery isn’t fully dependent on e-commerce. It offers a full-stack suite of delivery services beyond just e-commerce parcels.

These include consumer electronics, FMCG goods, and automobile deliveries. It faces less concentration risk.

Delhivery could suffer better than Ecom Express. Losses in one area can be balanced by others. Ecom Express didn’t have that cushion; its overreliance made it fragile.

The acquisitions may also serve another purpose. It blocks competitors like Blue Dart, which has shown interest in growing its e-commerce share through acquisitions. By consolidating, Delhivery shrinks the pool of easy targets.

Still, investors remain unconvinced of the benefits of acquiring a struggling company. Problems need to be solved, as Ecom Express won’t contribute to the bottom line soon. The deal’s true impact is still uncertain.

MEME OF THE WEEK:

Dalal Street Dictionary

So many students dream of an MBA abroad but get stuck in the decision. NYU, INSEAD, or Wharton?

Each is prestigious, but which one gives you the most bang for your buck?

Once you’ve committed to going abroad, you’ve already taken on more cost, complexity, and risk than staying in India. The real question now is which foreign MBA gives you the best return for that added risk?

Investors face a similar dilemma when choosing active mutual fund strategies. Their tool for solving it is the Information Ratio. It measures how efficiently a strategy converts extra risk into extra return, similar to choosing between top colleges.

Here’s the formula:

Let’s break down the formula using the MBA analogy:

• The active return: the extra return a strategy gives over a benchmark, like comparing a foreign MBA’s payoff to that of an Indian MBA.

• The tracking error: how much the return fluctuates compared to the benchmark. In our case, the added unpredictability of going abroad.

So, if a strategy has an Information Ratio of 1.0, it means every 1 unit of extra risk brings 1 unit of extra return. A ratio of 2.0? Even better! You’re earning double the reward for every unit of risk.

But how is this useful in markets?

Let’s say you're choosing between two active mutual funds:

• Fund A gives 3% more than the benchmark but is volatile.

• Fund B gives 2% extra, but steadily.

Even with lower returns, Fund B wins because it uses risk more efficiently. The Information Ratio helps find more consistent compounders.

Just like MBA choices, it’s not about who offers the flashiest upside. It’s about who delivers the most return for the risk you already decided to take.

What Caught My Eye?

1. Apple airlifts 600 tonnes of iPhones from India!

2. Howard Marks on the uncertainty of investing.

3. Mukesh Ambani’s secret business?

4. What to do in bear markets?!

5. Apollo Hospital’s ₹6,000 Cr expansion plan.

Recommendations

This week, I recommend watching a podcast with Azhar Iqubal, founder of Inshorts. He shares the origin story, product mindset, and startup lessons behind building one of India’s most successful digital news platforms from a simple 60-word idea.

Thanks for reading this weekend’s newsletter. I’d like to know your thoughts, so please feel free to comment below. Your feedback helps us improve!

And don’t forget to like, share, and restack!

Song of the Week:

This is Parth Verma,
Signing off.