Start-ups playing in the digitally-driven logistics and supply chain space in India have attracted investments worth $1.89 billion
Fuelled by growth in sectors such as manufacturing, retail, e-commerce, food delivery and consumer goods, along with the implementation of the Goods and Services Tax (GST), the demand for logistics and supply chain solutions in India is also on an upward trajectory.
Once considered unattractive by the venture capital firms globally, the logistics sector, largely driven by the use of future technology, has become the darling of global investors, including SoftBank, Sequoia and Tiger Global.
The start-ups playing in the digitally-driven logistics and supply chain space in India have attracted investments worth $1.89 billion, till date, in 2018, according to a data provided by start-up research platform Tracxn Labs. This is a major increase from the $77-million funding that the segment received in 2014, which was also the period that witnessed emergence of some currently popular logistics start-ups, such as Rivigo, XpressBees, and Swiggy, among others.
Compared to the last year’s funding of $447 million, this year the investments seem to have more than doubled; however, the numbers are not comparable as $1 billion has gone to food delivery start-up Swiggy alone.
The logistics sectors has suddenly picked up pace with a series of big ticket investments this year. BlackBuck raised about $27 million in October, and is in talks to raise another $150 million, according to media reports. Rivigo has raised $50 million in January this year ,and is in talks to raise a bigger round of $400-odd million. Another start-up, ElasticRun raised about $8 million. Tiger Global-backed Delhivery has raised over $257 million so far and there are reports of Japanese conglomerate SoftBank investing another $250 million soon.
According to a recent report by CARE Ratings, the country’s largely fragmented logistics sector is likely to be at $215 billion by 2020-21 from approximate size of $160 billion in 2016-17 on back of development of logistics-related infrastructure such as dedicated freight corridors, logistics parks, free trade warehousing zones and container freight stations among other initiatives like GST, investments in road infrastructure, development of inland waterways and coastal shipping.
Impact of GST
Ganesh Rewanwar, co-founder of city transportation start-up Freightbazaar said, “After GST implementation, logistics sector is witnessing a significant growth and changing market dynamics. There is a limited use of technology in the segment with a high level of inefficiency. It provides great opportunity for technology driven organisations to create major value. Technology driven start-ups offer good opportunity to VCs. While intra-city road transportation attracted a lot of VC investment, there has been limited investment in inter-city road transportation.”
Pushkar Singh, founder of intra-city logistics service provider LetsTransport, said that while the entry of e-commerce has really helped expand the logistics market, the use of technology logistics and supply-chain is becoming very efficient that is helping companies garner more business which is resulting in better sales thus forcing large investors to revisit the sector.
Singh added that in the last five years over hundred-odd start-ups came up in this segment but only a handful have survived. Other players in this space, that helps aggregate small trucks and LCVs, are Porter and BlowHorn.
“Investors were waiting for the consolidation to happen. Now that has happened, a few players like us have emerged with strong financials and business model. We expect, more big ticket-size investments and unicorns to come in this space,” Singh said adding that lack of funds, lack of awareness about usage of technology by delivery partners, low margins, delay in turnaround time of trucks and lack among several other inefficiencies. However, technology such as artificial intelligence and data analytics have solved a lot of these problems and helped improve efficiencies.
Source : https://www.thehindubusinessline.com/economy/logistics/logistics-start-ups-attract-189-b-investments-in-2018/article25836382.ece