Paperfly Regains Momentum, Targets Growth and ProfitabilityPaperfly Regains Momentum, Targets Growth and Profitability After emerging from financial difficulties, local co-founders have acquired a controlling stake in Paperfly, a smart logistics startup. The startup now aims to regain market share and achieve profitability by September. Acquisition and Exit Indian investor Ecom Express has sold its entire 82% stake in Paperfly to the co-founders for an undisclosed amount. The share transfer was finalized last week, allowing the local founders to take full ownership of the company. Cash Crunch Aftermath and Recovery Paperfly experienced a cash crunch in September 2022, leading to a temporary shutdown. However, the co-founders managed to resume operations within weeks. They now believe the company is on the path to becoming profitable. Business Segments and Growth Strategy Paperfly offers both B2C and B2B logistics services. While the B2C segment faces fierce competition, the co-founders see opportunities in B2B logistics outsourcing as companies seek more efficient distribution solutions. Investment and Future Outlook Despite the initial investment cancellation by Ecom Express, Paperfly co-founders are determined to invest in the company’s growth. They believe that the booming social media trade and increased online sales will drive demand for logistics services. Market Share and Profitability Targets Paperfly currently delivers approximately 26-30 thousand orders per day and expects to regain market share. The company projects a turnover of over Tk40 crore by 2024 and aims to achieve profitability by September 2023.
The smart logistics startup, which is putting the tough times behind it, now expects growth and profitability by September
In a rare occurrence in the country’s startup landscape, local co-founders have acquired the entire 82% stake in third-party logistics (3PL) startup Paperfly from Indian investor Ecom Express for an undisclosed amount.
Paperfly has emerged from the cash crunch that led to weeks of shutdown in September last year and is now looking to regain market share and become profitable by the end of September this year, founder Shahriar Hasan told The Business Standard in a recent interview.
“Our foreign investor wanted to exit, we reached an amicable deal to buy out their stake and the share transfer was completed last Thursday,” said Rahath Ahmed, one of the co-founders.
However, they refused a request from TBS to disclose the transaction value for which the foreign stake in the company was transferred, citing a “non-disclosure agreement”.
However, industry sources with knowledge of the matter told TBS that the acquisition price was less than Tk10 crore, which Ecom Express had hoped for in the initial phase of its exit attempts last year.
Ecom Express invested a total of nearly Tk 140 crore, of which Paperfly as a company received nearly Tk 100 crore and Ecom Express spent the rest of the amount on buying up the shares of the early investors.
Both Paperfly, a pioneer in technology-driven curbside pickup and last-mile delivery services in the country, and Ecom Express, a top player in India’s 3PL market, banked on the potential of smart logistics in the densely populated Bangladesh market amid a boom in online commerce during the pandemic.
Following the first round of investment of around Tk100 crore in Paperfly in 2021, which built Paperfly’s infrastructure for a nationwide pick-up and delivery network alongside its technology platform and teams, Ecom announced another investment of Tk102 crore in April 2022.
However, the global landscape of startup investments after the war in Ukraine changed, forcing Ecom Express to cancel its planned second round of investment.
Ecom Express had to postpone its expected Rs 4,600-crore IPO on the Indian stock market and later had to rely on smaller private equity due to the then slump in technology stocks.
“It (the cancelled tranche of the announced investment) was unfortunate for us, in an already difficult business situation, caused by fierce competition and continued cost increases,” Paperfly co-founder and CEO Razibul Islam recently told TBS at his office in the capital.
Shahriar Hasan said that besides the business-to-consumer (B2C) 3PL segment, Paperfly has been receiving increasing response from the country’s largest conglomerates for its B2B (business-to-business) logistics outsourcing service.
More and more companies, especially in the consumer durables sector such as electronics and appliances, often find it profitable to use specialized third-party services to distribute their slow-moving goods across the country. Maintaining their own fleet of trucks often doesn’t offer the economies of scale needed to serve many corporate customers at the same time, which 3PL companies do, he said.
However, the Paperfly encountered a problem with continuing the necessary investments.
Due to the cash crunch, Paperfly had to shut down operations in late September last year. Over Taka 10 crore of its total assets were stuck in deposits with a distressed non-banking financial institution and as receivables from a collapsed, unmanageable e-commerce platform, Evaly.
“After years of successful corporate careers, we founded Paperfly to solve the logistics problem in Bangladesh’s growing economy and provide innovative, convenient and cost-effective smart logistics solutions to businesses and people,” said Hasan.
“Despite the setbacks, we did not give up and last year, with the help of our loyal customers and the state-of-the-art hard and soft infrastructure we had already built, we managed to resume operations in just a few weeks,” he added.
He cited the state-of-the-art digital platform for smart processes, the self-built semi-automatic sorting facility in the warehouse and the in-house technology and business talents as Paperfly’s greatest assets.
Despite some ups and downs in between, the demand for courier services has increased, said Razibul Islam, adding that only the market share within the sector has changed from time to time.
According to market research by Paperfly, the average daily number of courier services, including traditional services and e-commerce platforms’ own channels, exceeded half a million in Bangladesh this year, more than double the number three and four years ago.
Businesses and individuals across the country looking for home pickup and delivery services continue to find it profitable and convenient.
For example, the costs for the B2C segment of collecting the cash amount upon delivery and forwarding it to the sellers are lower than the processing costs for online e-commerce payments.
Rahath Ahmed said: “Specialization and optimization of resources are our unique strength. This will enable us to grow to a new scale in the coming years.”
Less than 3% of retail transactions here take place online, and there are every reason to encourage growth, he added.
“In Bangladesh, there is a booming social media trade; e-commerce platforms are selling every day and more and more traditional businesses are moving online to boost sales.”
Paperfly currently delivers around 26-30 thousand orders per day and expects to profitably regain market share.
“We continue to invest our efforts, time, talent and capital in the next phase of our growth,” he said, adding that the company will seek new investments as needed.
By 2024, the company expects a turnover of over Tk40 crore, said Rahath Ahmed.
