Home >Companies >Start-ups >Flush with funds, Flipkart boosts investments in logistics arm eKart

Bengaluru: India’s largest online retailer Flipkart, which raised nearly $3 billion in 2017 from investors such as Japan’s SoftBank Group Corp., China’s Tencent Holdings Ltd, eBay Inc. and Microsoft Corp., has invested over $400 million in four separate tranches in its logistics arm eKart over the past four months, according to recent regulatory filings.

According to filings with the ministry of corporate affairs, Instakart Services Pvt. Ltd received four separate tranches of investment from Flipkart, amounting to roughly Rs2,600 crore (about $408 million) since September. The latest tranche of Rs1,200 crore was the largest infusion that Flipkart made in eKart over the past six months, according to documents filed on 19 December.

eKart, controlled by Instakart Services, was started by Flipkart as an in-house logistics business and later spun off due to regulatory hurdles. Flipkart’s eKart arm is responsible for order fulfilment, post-delivery and seller services. It is a key business for Flipkart, employing more than 20,000 workers who deliver smartphones, clothes, shoes, TVs and other products to customers. Flipkart also separately allocated nearly $460 million towards eKart for investments and acquisitions earlier in 2017, according to filings from October.

Functions such as supply chain and logistics are typically the two most resource-intensive areas in the e-commerce business and over the years companies such as Flipkart and Amazon India have been trying to find newer ways of reducing costs for each delivery.

As e-commerce grew in the country, online retail start-ups soon realized the need for specialized courier services to cater to the need of the online retail segment—something that traditional courier partners had failed to meet immediately.

The e-commerce logistics market has attracted some serious capital in the last 12-18 months. Last year, Delhivery raised $100 million from Carlyle Asia Partners and existing investors.

In March last year, Mint reported that Ecom Express has initiated the process of raising at least $75 million in a new round of funding. According to a report by the Economic Times, logistics firm Xpressbees is in talks to raise about $100 million from China’s Alibaba Group.

According to a report by investment bank Avendus, new-age logistics businesses are expected to be the sunrise sector for investments in the start-up ecosystem. This market is expected to grow to $9.6 billion by 2020 from $1.4 billion in 2015. Last year, eKart underwent a revamp in strategy.

Prior to Kalyan Krishnamurthy’s elevation as CEO, eKart was also looking to expand into hyperlocal deliveries, including food, aggressively cut costs and tie up with offline retailers and small neighbourhood stores as part of a revamp of its courier business.

However, a few months later under Krishnamurthy’s leadership, eKart abruptly shut its customer-to-customer service and hyperlocal delivery offering.

Since mid-2017, Flipkart co-founder and group CEO Binny Bansal has been acting as a mentor for eKart.

Under Krishnamurthy’s leadership at Flipkart, the online retailer has kept burn rates under control and brought down costs, especially at eKart, which typically accounts for a large chunk of overall cash burn.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Edit Profile
My ReadsRedeem a Gift CardLogout