In order to strengthen its supply-chain operations, Snapdeal is reportedly planning to acquire GoJavas, in which, it owns a significant amount of minority stake.
In India, supply-chain and logistics play a crucial role for e-commerce businesses. Even Amazon had to adopt to the situation and started its own logistics service — Amazon Transportation Services — in India.
While most leading e-commerce firms in India have their own logistics service, Snapdeal opted to tread long a different route. Instead of starting its own service, it acquired a minority stake in logistic startup GoJavas. However, it seems that the minority stake isn’t enough and now, it is looking to acquire the company.
It is not yet clear that how much is Snapdeal willing to pay to GoJavas to acquire its operations. When Snapdeal acquired around 42 percent stake in the company for Rs. 250 crore, GoJavas was valued at Rs. 600 crore.
GoJavas was initially formed as a logistics arm of Rocket Internet-backed online fashion retailer Jabong. However, it was spun off as a third-party logistics firm in 2013. While it still is a delivery partner for Jabong, Snapdeal is the biggest delivery partner for the company. It is, however, very unlikely that the company will continue its partnership with Jabong post acquisition.
This acquisition will help the company gain back the market share that it has lost to Amazon India and Flipkart over past few months. Amazon started focusing on supply-chain infrastructure and faster order delivery, and thus, it took the pole position.
As per some sources, Snapdeal is likely to execute the acquisition through Vulcan Express, its end-to-end logistics unit that primarily deals with its bulk orders and manages its delivery centres and its almost three-lakh sellers.
While the Snapdeal founder had earlier denied acquisition of GoJavas, the recent happennings suggests otherwise. According to sources close to the development, GoJavas has shut down its centres in the South and West zones. Also, on Monday, Vijay Ghadge, former chief operating officer of GoJavas, joined Vulcan Express as its COO.
Also, several reports are suggesting that GoJavas is in the market since quite some time to raise a new funding round but is struggling. Thus, the acquisition, if done, seems like a win-win deal for both companies.
GoJavas currently delivers to more than 3,200 pin codes, covering over 300 towns and cities. In coming 12 to 18 months, the company has targeted to be operational in 4,000-4,500 pin codes, and expand to 600-800 towns and cities.
Snapdeal’s major competitor in this space includes Flipkart and Amazon. While Flipkart is currently facing a series of valuation markdowns, Amazon India recently received commitment of additional $3 billion funding, taking total to $5 billion.