Logistics and transportation startup Rivigo is in the midst of revisiting its business model and downsizing the head count in the organisation. The fact that this decision by the management has come about suddenly can be gauged from the fact that the company has withdrawn the employment offers it had issued to freshers from the various institutions from where it had concluded campus recruitments earlier. These institutions included National Institute of Industrial Engineering, Indian School of Business, Indian Institute of Technology, and Indian Institute of Management. There were at least 50 offers issued to students from these institutes. Apart from this, 70 to 100 employees from the rolls of the company are also being eased off.
One of the two co-founders of Rivigo has confirmed these developments and has indicated that the candidates recruited and issued letters of offer have been ‘outplaced’, meaning they have been diverted to other employers.
The reasons being cited for the change in plans are ‘performance and market dynamics’. The reality is Rivigo has been working on the owned-truck model of transportation service, which is considered asset-heavy. The conventional transportation business in India is run on the rented-trucks model. Reports indicate even the asset-light service the company ran was not properly managed leading to leaks and losses. The investors of Rivigo have apparently advised the company to cut costs.
This is the background to the revision in the business strategy and the resultant employee reduction and withdrawal of campus recruitment offers.
Rivigo has had no major difficulty with its fundraising efforts. It has marquee VCs as investors in Warburg Pincus and SAIF Partners, who have given the startup $65 million just a week back.
On the financials side, the last full year ending 2018 March showed a revenue of Rs 720 crore and expense of Rs 990 crore. The co-founder however claims the company has since improved its margins this year and they have managed to double their gross margins. The company operates three distinct services, full and part truckloads and freight brokerage. The company has a relay service as well.
The investors will now be watching the company closely in light of these steps to reduce the overall expenditure and turn profitable.