Snapdeal invests Rs 152.44 crore in its logistics arm Vulcan Express

Earlier in June as well, Vulcan Express received $5.68 million (Rs 36.5 crore) from Jasper Infotech.
Snapdeal invests Rs 152.44 crore in its logistics arm Vulcan Express
Snapdeal invests Rs 152.44 crore in its logistics arm Vulcan Express
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After backing away from the sale to Flipkart, ecommerce marketplace Snapdeal has now infused Rs 152.44 crore into its logistics arm Vulcan Express.

According to a VCCircle report, Vulcan Express raised the sum by allocating 15.24 crore equity shares at Rs 10 apiece to Jasper Infotech, which operates Snapdeal, on August 7, Registrar of Companies (ROC) filings show.

Earlier in June as well, Vulcan Express received $5.68 million (Rs 36.5 crore) from Jasper Infotech.

It is an interesting move by Snapdeal as it has been scouting for buyers for Vulcan Express.

It was reported later that Snapdeal was looking to sell the logistics arms for around Rs 200 crore. However, there weren’t many takers for the company and the proposed sale got a lukewarm response.

VCCircle reports that this infusion would now mean that plans to sell Vulcan Express have taken a backseat and that Snapdeal might be looking at reworking its strategy of growing its logistics arms into a profitable business.

Experts tell VCCircle that this infusion of funds by Snapdeal doesn’t make sense unless it was doing ‘some sort of balance sheet cleaning’.

After merger talks with Flipkart fell through, Snapdeal decided to continue independently and announced a new strategy – Snapdeal 2.0, where it will operate as a pure play marketplace. It also sold its digital wallets business Freecharge to Axis Bank for Rs 385 crore. Its other companies Unicommerce and Vulcan were on the block as well.

However, VCCircle reports that Kapil Makhija, chief executive of Unicommerce, has dismissed any talks of a sale. He said the firm was profitable and was looking at international expansion.

It now looks like after selling Freecharge, it is changing its mind in terms of selling its other entities.

In FY16, Vulcan Express posted a huge jump in net revenue to Rs 184 crore, up from Rs 26.7 crore in FY15. However, losses also widened six-fold to Rs 20 crore from Rs 3.2 crore in FY15. The company is yet to file its financials for FY17.

Unlike Freecharge that Snapdeal acquired, Vulcan Express was built by the company after its acquisition talks with GoJavas didn’t materialize.

Another way to look at this would be that given the lukewarm response Vulcan Express’ proposed sale is getting, it might make more sense for Snapdeal to make it a profitable entity and hence make it an attractive proposition for buyers.

VCCircle’s report says that if Vulcan does turn the corner, it could prove critical to Snapdeal 2.0’s success.

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