Shiprocket's back to its favourite accelerant: acquisitions

Shiprocket is the largest player in the space, competing with the likes of NimbusPosts, iThink, Shipway, ShipEase, and Shipyard. (File Photo: Mint)
Shiprocket is the largest player in the space, competing with the likes of NimbusPosts, iThink, Shipway, ShipEase, and Shipyard. (File Photo: Mint)

Summary

  • The logistics unicorn is leveraging strategic acquisitions to widen its capabilities and reinforce its market position

BENGALURU : Two years after the Zomato- and Temasek-backed Shiprocket gained its unicorn status, the logistics startup has embarked on a tried-and-tested route to accelerate growth—through acquisitions. 

Shiprocket is scouring for companies specialising in marketing and advertising tools, conversion and data platforms, customer experience enhancements, capital and lending services, and cross-border enablement, said MD and CEO Saahil Goel in an interview with Mint.

Goel declined to disclose the company's current cash reserves. Shiprocket had last raised $11 million in funding from McKinsey in October. Currently valued at $1.3 billion, Shiprocket has raised about $350 million from a roster of investors including PayPal, Bertelsmann India Investments, and Tribe Capital, according to research platform Tracxn.

Founded in 2017 by Gautam Kapoor, Goel, and Vishesh Khurana, Shiprocket entered the billion-dollar unicorn club in August 2022 following a $32 million investment round led by Temasek and Lightrock. Shiprocket elevated its chief business officer Akshay Ghulati as co-founder in 2020.

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Acquisition strategy

The Gurugram-based logistics unicorn had previously embarked on a 24-month acquisition spree following its $185 million Series E fundraise in December 2021. 

Over the past two years, Shiprocket has acquired five companies, including Glaucus Supply Chain Solutions, Wigzo, Pickrr, Omuni, and Rocketbox, to diversify and strengthen its service offerings.

It also bought a majority stake in its direct competitor, Pickrr, for about $200 million in June 2022. 

The acquisitions have significantly contributed to Shiprocket's strategy to consolidate its leadership in the logistics sector.

“We will continue attracting capital and become net profitable in another few quarters," said Goel, adding that the best use of capital for the company was to find a way to accelerate its growth roadmap. “We will continue to look for ways to deploy that and that will come in the form of 9-10 companies."

It has been a planned strategy, said Goel, adding that the last one year has been about assimilating the past acquisitions. 

“We've been quite acquisitive over the two years where we bought four or five companies just to expand our stack, bring in more capabilities. We focused very hard last year on trying to assimilate a lot of the acquisitions," he said.

Each acquisition has been meticulously planned to address specific gaps within Shiprocket's operations, enhancing its comprehensive suite of logistics solutions, Goel said.

"We build shipping and the post-order customer experience. We bought one company there to bulk it up and to be the undisputed leader. And then we realized that within shipping, we were only doing parcels. We bought Glaucus to help us enable warehousing and we bought Rocketbox to enable shipping for large consignments that we did not have the capability for," Goel explained.

Shiprocket is the largest player in the space, competing with companies like NimbusPosts, iThink, Shipway, ShipEase, and Shipyard.

“When you look at a service offering for an industry, there are multiple problems or gaps that you need to fill. The way (Shiprocket is) growing, it's very difficult to actually focus on filling the gaps themselves," said Abhishek Maiti, director, 1Lattice, a market research consulting firm. “But the idea is to fill the gaps quickly, so that (they) have a comprehensive offering without any gaps or glitches."

Maiti pointed out that four out of Shiprocket's five acquisitions so far were related to the direct-to-consumer startup space. “It's been an organised and a well-thoughtout effort by Shiprocket to consolidate its service offerings for enabling D2C businesses," he added. "I don't think they will defocus on (micro, small and medium enterprises), that has always been their strength, but I think it's a logical thing to not miss out on D2C."

Goel highlighted the significance of being proactive yet prudent in hisacquisitions strategy. 

"There are four or five market segments and there are five distinct pillars—sourcing, ads and marketing, payments and checkout, fulfillment and shipping, and then there's capital. It's not like we need to consume a tonne of cash to build what we want. What we can opportunistically use the cash for is to speed up some things," he added.

However, Goel acknowledged that the integration process has posed greater challenges than anticipated, particularly from technological and cultural perspectives. 

"There have been difficulties integrating from the technology side and from the culture side. I think it's important that the leaders kind of align on value systems. Different companies are groomed differently. It's like a post-marriage scenario in some ways and it takes some time to get used to each other," he reflected.

Financial performance and future plans

The company is also actively expanding its product lineup to spur growth. Shipping remains its largest revenue stream, accounting for about 80% of total earnings. Just two years ago, this figure stood at 100% before the company began diversifying its offerings. The remaining 20% of revenue now comes from these new categories.

Among the new solutions, Cross Border and Shiprocket Checkout are showing rapid growth. Cross Border enables merchants to sell on platforms like Amazon and eBay by offering cost-effective global shipping solutions, while Shiprocket Checkout streamlines the checkout process for smaller brands. Goel indicated that the company plans to intensify its focus on these areas in the coming year.

Shiprocket's revenue rose sharply from 611 crore in FY22 to 1,089 crore in FY23, although its losses also widened from 93 crore to 341 crore during the same period, as per filings with Tofler.

Addressing profitability, Goel said that the company is currently prioritizing growth but has the capability to become profitable at any point. "Shipping is profitable. Some new experiments are within our hands and we stay near the profitability radar," he said.

While Goel chose not to disclose revenue multiples, he emphasized that the key performance indicator for Shiprocket is the volume of transactions it facilitates or the dollar value of Gross Merchandise Volume (GMV) it processes.

The company wants to go from the current $3 billion to $10-12 billion in the next five years. Goel realises it is an ambitious target. “It's a time for us to embed, for us to power as much as we can," he said.

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