Prosus and SoftBank-backed business-to-business (B2B) logistics and ecommerce company is betting big on scaling regional brands and accelerating its quick commerce business to shore up its revenue.
The Pune-based entity reported its financial results for FY24 and has managed to pare its losses by nearly 42% to Rs 354.62 crore on a standalone basis. Revenue from operations too followed a similar trend, dropping by nearly 48.6% for FY24.
The company works with FMCG brands, helping them expand their distribution in rural India apart from running its own third-party logistics service with leased vehicles and partnering with delivery personnel on a contract basis.
The reduction in losses came on the back of its pivot to focus on high-margin regional brands, increasing the take-rate by nearly three times, Co-founder and CEO Sandeep Deshmukh told YourStory. Take-rate is the money made per transaction by a platform offering services.
“In FY23 our priority was to build a large business and become profitable by adding regional and local brands. We flipped this strategy in FY24 to first build a profitable network by adding regional and local brands,” said Deshmukh, adding, “It is easier to turn profitable with higher take-rates with regional brands, and we plan on gradually adding national brands.”
The company had reported a total loss of Rs 618.99 crore for FY23, while revenue from operations stood at Rs 4,754.86 crore. The company recorded revenue of Rs 2,434.84 crore for FY24 on a standalone basis.
Deshmukh further said the company was targeting operational profitability for October 2024, validating its strategy for growing with regional brands. The logistics player also expects demand for its white-labelled quick commerce solution for direct-to-consumer (D2C) brands leading business growth for FY25.
Besides offering B2B distribution and logistics to kirana stores and leveraging its dark stores for quick commerce business, ElasticRun is also looking to monetise its SaaS offering for first and last-mile delivery with ecommerce players to add to the bottomline.
Regional crorepatis
ElasticRun currently has a portfolio of 24 ‘Crorepati Brands’, which have expanded beyond a specific state or region to scale to sub-national and national levels through the company’s distribution network. These brands have managed to clock in Rs 1 crore worth of sales in a month as part of their scaling-up efforts with the company.
The service stack offered by ElasticRun includes marketing for the brands in new regions, distribution, and marketing automation. While the margin on sales is small in the B2B-kirana distribution model, these brands offer better credit periods when they see value in the proposition, said Deshmukh.
“These brands are willing to give us the right set of inventory for a market, working capital placement, and commit to a set amount of capital for marketing initiation, apart from the take-rate,” Deshmukh said, adding that high-margin brands currently make up for 90% of ElasticRun’s sales.
He gives the example of a Karnataka-based detergent brand, which managed to scale to a regional level, and another multinational from South Asia entering the Indian markets with its offerings, which make up the typical profile of crorepati brands.
The company also added its private labels to the distribution to fill gaps in the market when it comes to assortment. “Today, a fifth of our sales are from our own private labels,” Deshmukh added.
Joining the Quick Commerce race
Apart from working with ecommerce players to service their last-mile delivery business, ElasticRun is also partnering with D2C brands to open up its 820 dark stores across 100 cities for two-to-four-hour deliveries.
“We have seen a strong pull from D2C brands across food, beauty, personal care, and fashion who want to reach their customers in the two-to-four-hour window. We did not originally build for quick commerce but our captive network has helped us scale faster,” said Deshmukh. He added that the white-labelled and multi-tenant quick commerce business will be a strong contributor to growth in the ongoing FY25.
According to consulting and professional services firm Grant Thornton, the Indian D2C market is expected to reach up to 2.7 billion shipments by 2028. It has a 3X growth rate compared to the overall retail market over the next three years. This presents an opportunity for capacity building for logistics across warehousing, last-mile connectivity, and technological upgrades.
“For D2C brands, the decision to handle rapid delivery timelines in-house versus partnering with quick commerce platforms often depends on the business size and strategic priorities. For smaller D2C brands, partnering with quick commerce platforms can be advantageous. Quick commerce platforms offer visibility to a broad customer base, which helps smaller brands establish a presence among new audiences, boosting brand awareness,” Naveen Malpani, Partner at Grant Thornton Bharat told YourStory.
He added that larger D2C brands opt to handle rapid deliveries independently in partnership with third-party logistics players to avoid high commissions associated with quick commerce platforms and gain better control of customer experience and maintain brand identity.
Road ahead
Besides its core business of distribution for kiranas and offering third-party logistics services to ecommerce, ElasticRun has also opened up its SaaS platform to ecommerce and D2C brands to manage their order origination and delivery.
According to reports, Meesho’s logistics arm Valmo also uses ElasticRun’s SaaS platform for realising orders. ElasticRun declined to comment on this.
“We work with all ecommerce players in the country as part of their last-mile and first-mile delivery. We have added nearly 14 large enterprises to this and will continue to add the longtail. We opened up our tech stack last year, and we have already seen it generating revenue,” added Deshmukh.
With multiple levers for generating revenue, ElasticRun is prioritising profitability over scale. The entity, which raised $461 million over multiple funding rounds, saw its valuation dip to $800 million earlier this year from a peak of $1.5 billion in 2022, according to an HSBC report.
“In FY24, we flipped the strategy to build a profitable network first. The idea is that if you have cash on the books, take tough decisions today,” said Deshmukh, adding that the learning also comes from public markets where profitability is key. He said ElasticRun has Rs 1,600 crore on its balance sheet.
