Discounted: Snapdeal likely to sell off Vulcan to AllCargo for about Rs 30 crore

Gurgaon based E-commerce firm Snapdeal is in an advanced stage of talks to sell off its logistics arm Vulcan Express to BSE-listed logistics firm AllCargo for a sum of around Rs 20-30 crore, according to people privy to the matter.

"The term sheet hasn't been signed yet and the company is evaluating a draft," said one of the persons quoted above adding that what remains to be decided is whether it will be an all-cash deal or not.

The amount is a fraction of the almost Rs 200 crore investment that Snapdeal made in Vulcan in the last few years, said the second person quoted above. As per data firm Tracxn, Snapdeal has invested close to USD 29.4 million in Vulcan Express so far.

AllCargo dubbed the acquisition talks as 'market speculation'.  "We do not respond to market speculation," said Rohan Mittal, vice president, strategy and mergers and acquisition of AllCargo in an email response to Moneycontrol.

Mumbai-based AllCargo provides global transportation logistics solutions and has a presence in over 160 countries.

Snapdeal confirmed it is considering 'strategic options' for Vulcan Express. Snapdeal is pushing for an all-cash deal with AllCargo, just like the way it sold off its payments arm Freecharge to private lender Axis Bank.

“Vulcan Express is evaluating multiple strategic options and any final decision will be made only after consultation with our Board on the relative merits of each option, which has not occurred yet,” said a Snapdeal spokesperson in an email response.

Snapdeal received around Rs 300 crore in cash from the Freecharge deal. If Vulcan too is sold, an all-cash deal will expand the shrinking coffers of the company a little further, at a time when it has decided to go solo with a much reduced monthly cash burn.

"If all goes well, the deal with AllCargo will be finalised in the next 10 days," said the source.

AllCargo also provides e-commerce logistics and offers automated warehouse solutions, e-fulfilment, cross dock management, return management services among other things, which could make Vulcan a strategic fit for the company.

Earlier this year, the company announced its plans of entering into the last mile delivery business as well. AllCargo also announced that it was looking at acquisitions worth Rs 200 crore this year.

The company is gearing up for an aggressive domestic play and has set a target of growing its domestic revenue three times at Rs 1,500 crore from the segment by 2020.

Vulcan's acquisition will help the company in this direction.

Vulcan has had Snapdeal as its biggest client, so far. With the company shrinking its operations, Vulcan's delivery numbers have also gone down drastically. Vulcan offers services such as pickup, consolidation and fulfilment operations, warehousing solutions and last mile delivery services.

Besides AllCargo, Vulcan has had other potential suitors in the past such as Gati and TVS logistics.

Snapdeal also wanted to sell off Vulcan to Flipkart along with Snapdeal. It is also said that Flipkart's reluctance to include Vulcan in the deal was one among the several other reasons for Snapdeal to call off the deal.

Snapdeal called off the acquisition talks with rival Flipkart in August, after Axis Bank agreed to acquire Freecharge.