One of the major leaders in the logistics sector, Mahindra logistics is planning to acquire the B2B express business of Rovigo for an amount of Rs 225 crore. This acquisition of the B2B express of the company took place through a downturn sale after several talks with companies like FirstCry, and Flipkart, which did not see any success. However, the deal between the two companies now is expected to be concluded by November 1. The purchase of Rivigo includes assets, teams, and clients. According to industry experts, the deal adds value and has an EV/sales ratio of 0.6x based on FY22.
20% of Mahindra Logistics’ total revenue comes from its network business, which also includes freight forwarding and B2B express services. Following the advice of the management team that their focus is on increasing the network services segment through both organic and inorganic routes, the acquisition is intended to bolster the current B2B express business. The long-lasting economic downturn has made investors more cautious, which has made it challenging for the unicorn logistics tech company to raise new money.
Rivigo has had difficulty finding funding and reining its spending. Mahindra Logistics should be able to expand the unicorn’s digital platform much more successfully given its warehouse operations. As of March 31, 2022, Mahindra Logistics’ net cash position was Rs 210 crore, and its operating cash flow for FY22 was Rs 199 cr. The transaction is expected to increase sales by 7-8% and may short-term affect RoCE figures.
Mahindra logistics is likely to acquire the B2B express business of Rovigo for an amount of Rs 225 crore.
Over the years, Rivigo has raised funding of around $300 million to date, which makes the valuation near the mark of $1 billion. As the nature business of Rivigo is an asset-heavy one, the company was impacted due to the same while also having to go through failed funding during the pandemic. However, 80% of the company’s trucking fleet has already been sold and the company was expected to raise the valuation by $50-100 million, as per the industry standards. B2B Express is where most business of the company comes from. Delhivery, Safexpress, Blue Dart, and Gati are also a part of the peer set. The B2B express network of Rivigo now has over 25 processing branches and spans over 19,000 pin codes.
Over the period of the past year, Mahindra Logistics has seen a deficient fall of 25%, while the Nifty Smallcap 100 Index has decreased by roughly 1%. According to Bloomberg data, 77 percent of the 13 analysts following the stock have a buy rating, while the other 23 percent have a hold rating.