The Chinese e-commerce giant, Alibaba Group Holding, is reportedly in advanced talks to acquire a minority stake in the logistics company, XpressBees. The company is looking to acquire the stake by investing up to $100 million in XpressBees, the Economic Times reported.

The transaction, which is said to be in the final stages of negotiations, will be Alibaba’s sixth such investment in the Indian market, as it endeavours to take on the Indian e-commerce giant, Flipkart and its rival Amazon, by building a string of assets in the country.

“The deal is likely to close in the next two–three weeks,” said one of the persons close to the matter was quoted as saying. However, the exact stake that Alibaba will pick up in XpressBees could not be determined. The talks have reportedly been ongoing for over 18 months now.

XpressBees came into existence from baby and maternity product retailer, FirstCry, which is famously known for its acquisition of Mahindra’s Babyoye in 2016. FirstCry entered the logistics market in 2012 when it decided to express deliver its products and began a third party logistics (3PL) in lieu of this, in the beginning of 2015. The company was named BusyBees in 2015 and has seen the business grow since then.  The business was built by FirstCry founders Supam Maheshwari and Amitava Saha. However, after the demerger, Amitava Saha became the CEO of XpressBees, while Supam Maheshwari became the CEO of FirstCry.

Prominent investors of XpressBees include SAIF Partners, IDG Ventures India, NEA, Vertex Ventures, and Valiant Capital, some of which will, reportedly sell a part of their stake as a part of the deal with Alibaba. The company witnessed its revenue rise by 121% in FY 2017 to Rs 185.42 crore while the losses grew by 61% to Rs 57.71 crore, according to filings with the Ministry of Corporate Affairs.

XpressBees competitors include other online retail focused delivery companies like Delhivery and Ecom Express. According to industry experts, Delhivery is currently the market leader with over 300,000 shipments a day, while XpressBees is logging in 170,000-200,000 shipments a day and Ecom Express is making 120,000-130,000 shipments a day. E-commerce giants such as Flipkart and Amazon have their own logistics operations, which handle the bulk of their shipments.

If the XpressBees investment is successful, it would help Alibaba build an “iron triangle of businesses” (as founder Jack Ma calls it), in the e-commerce (Paytm Mall, Bigbasket), payments (Paytm) and logistics segments and thereby can lead to mutual benefits and growth amongst the businesses.

In China, the Alibaba Group has three online retail businesses, namely Tmall (B2C) and Taobao (C2C) and a payment business under its affiliate Ant Financial called Alipay. In September, the company increased its stake in one of China’s tech-enabled logistics companies, Cainiao, which is currently valued at around $ 20billion. During that time Alibaba had stated that it planned to invest $15 billion over the next 5 years, in order to enhance its global logistics network.

“Alibaba wants to make XpressBees the Cainiao of India, and over time logistics operations for all companies like Paytm Mall and Bigbasket may get consolidated under it giving it a larger captive customer base,” said another person familiar with the matter.

The imminent deals with XpressBees and Bigbasket will bring Alibaba’s and its affiliate, Ant Financial’s total investments in India to approximately Rs 11,000 crore or $1.7 billion. Over two third of this sum has been invested in Paytm. Furthermore, Ant Financial is reportedly in talks to invest up to $ 200 million in one of India’s top food delivery startups, Zomato.  As Alibaba continues to expand its portfolio in the country, the company is likely to shift one of its top executives, Senior Director Kshitij Karundia , from Hong Kong to the country to work closely with the business and look for further investments, a third person familiar with the matter was quoted saying.

XpressBees  has raised a total of Rs 120 crore of capital till now, in comparison to its competitors, Delhivery, which has raised Rs 1600 crore and Ecom Express, which raised over Rs. 1000 crore in capital. Experts believe that the capital XpressBees will receive from Alibaba as a part of the deal could trigger consolidation.

The tech-enabled logistics business market, which includes delivery startups, truck aggregators and warehousing firms, is expected to reach a high of $9.6 billion by 2020 from $1.4 billion in 2015, as per a report by the investment bank Avendus Capital. The report also stated the market would be dominated by the online retail logistics startups, which will have a market size of $6.6 billion.

(Picture courtesy: tech.firstpost.com)