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COVID-19 impact: Basics of our business & strategy remain the same, says Ecom Express CFO

Read what Mayank Gupta, CFO of Ecom Express has to say about challenges brought about by the Coronavirus pandemic.

April 30, 2020 / 12:47 PM IST
Mayank Gupta, Ecom Express CFO

Mayank Gupta, Ecom Express CFO

The lockdown imposed in a bid to control the spread of COVID-19 is hurting the ecommerce sector as a whole. Ecom Express, the Gurugram-based logistics provider to the ecommerce sector has a network of 25,000 people, many of them on its rolls across over 2500 cities and towns in India.

It counts Warburg Pincus and CDC Group Plc among its investors. The last funding round from CDC for $36 million was in December 2019.

Here in a chat with Shalini S. Dagar, Mayank Gupta, Vice President and CFO at Ecom Express shares his assessment of the year ahead.

Edited excerpts:

Last week Facebook made an investment in Reliance Industries. How does it look like from your point of view?Very early to comment on the development. However, I am sure it will have a positive impact on the sector. Both companies have deep pockets and will expand the market. We are part of that value chain and hence we too should benefit. There has been quite a back and forth on whether e-commerce players can ferry non-essential items.

What is your view?As of now, it is quite clear that it is just the essentials which includes medicines and daily staples which are being delivered. However, the volumes for these are limited.

How many times will a household order medicines?So currently, we are clocking around 5-7% of the 'normal' pre-COVID daily volumes. I think most common consumers also want delivery of items beyond the essential items too. We are quite hopeful that there will be a relaxation after May 4.

Do you see any challenge in terms of opening up after May 4?
We are present across 2500 cities. However, currently we are operating in just about 25-30 cities, so close to 1% of our typical geographical spread. Apart from the standard operating procedures formulated by the government, we have added our own safety measures too. So we do not see any challenge except for the fact that currently there are very low volumes that are being delivered.

Do you anticipate any challenge with respect to getting people on the ground, especially the delivery staff?There has been a lot of dislocation of labour due to the lockdown. There may be a challenge partially, but not too much since a good percentage of our people are on our rolls unlike many other home delivery organisations. There is unlikely to be a problem in terms of migration (and dislocation) because we usually hire local staff. For instance, we have staff in a place like Jhumri Telaiya (Koderma, Jharkhand) as well. We expect the dislocation to be far less in Tier 2 and Tier 3 cities than in the metro cities.

How are your cash flows holding up?
Ecom Express is a well-funded company and in our seven-and-a-half years of existence, we have been profitable for the last two years. We have two marquee investors. Warburg Pincus and CDC Group - and have full faith in them. We also closed a funding round last December. So, in normal pre-COVID-19 times, we were a profitable company. Due to the current nation-wide lockdown, the volumes have been impacted as our operations have been restricted to deliveries of small quantities of essential commodities only and that too, in very few select cities/towns. However, we are optimistic that once the lockdown ends, our sector will show a recovery, even if it is a modest recovery.  

What are the cost cutting measures that you are looking to implement?In order to ensure business continuity through these unprecedented times, just like any other organisation, we have taken some logical cost measures in line with evolving business conditions. We do hope that the lockdown is eased soon, so that it activates supply chain which will further support in building traction around business volumes.

When you look out into the next few quarters, what do you see as a worry?Collections would be a big worry. And non-payment in one area can cascade through the chain, which can bog down the entire value chain. So I suppose there needs to be relief packages for small and medium enterprises, and some other kinds of measures across the board. Small businesses would also need liquidity support.Given that one complete revenue cycle has been lost, large enterprises should support the value chain. They must pay their suppliers on time.We are one of the few players with the largest reach in the country with 2500 plus towns, covering 92% of the Indian population. And this includes cash-on-delivery. So we have good capabilities.

Overall, the tenor of your answers is quite optimistic. Is this your (and your company's) way of managing in a crisis?E-commerce is a very dynamic industry due to its virtue of quick evolution, changes in regulations and market conditions are not new. E-commerce logistics which is a new-age sector associated with e-commerce, provides the former real value addition to the marketplace, sellers as well as to end-consumers. As a business, we are used to changes and are quick to respond and adapt to those changes. Hence, being optimistic is a good way for us to be on the right track especially, during these difficult times, in a bid to get back to normal as early as possible. It is my firm belief that our supply and service chain will be a catalyst in driving social distancing norms.

Given the experience of this unprecedented lockdown, is there likely to be a change in your strategy in the months to come?No, not really. There is not likely to be any change in our strategic plans. The fundamental story about India remains intact. The basics of our business remain the same. We were not a company which was burning cash because it was topline or valuation focused. We have had a very balanced approach on liquidity too. We were over-invested in technology.
Maybe there will be some thinking on commercial real estate with the successful work-from-home experiment. We may adopt that model partially. We are humble, agile, tech-focussed. Our founders are in their 50s, with the next rung in their late 30s or 40s. We have strong investors. We have been profitable for the last two years. So from a long-term perspective, we seem to be doing well. We just realised it during this crisis.

Shalini Dagar
first published: Apr 30, 2020 12:45 pm