Paperfly founders set to buy out foreign investor's entire stake

Local co-founders of Paperfly, a prominent third-party logistics e-commerce firm, are poised to acquire the entire stake held by Indian investor Ecom Express, which is over 80% of the firm, at a massive discounted price, according to industry sources.

Confirming the "fruitful discussions" between the co-founders and Ecom Express regarding the buyout, a co-founder of the firm, on condition of anonymity, told The Business Standard that the deal is "still under process".

He also maintained discretion regarding the specific financial terms of the deal, including the price of the over 80% stake held by Ecom Express.

Paperfly, founded in 2016 by four Bangladeshi entrepreneurs, expanded its door-to-door pickup and delivery services nationwide in 2021 upon receiving a Tk100 crore equity investment from India-based 3PL giant Ecom Express.

Ecom had pledged an additional investment of Tk100 crore in 2022 but rescinded its commitment due to the shifting global investment landscape following the Russia-Ukraine conflict.

Industry sources told The Business Standard the Indian investor was seeking an exit strategy and is contemplating selling its entire stake at a significantly discounted price of Tk10 crore, representing a 90% value reduction in its initial investment.

Following the company's operational halt in late September due to financial constraints and operational challenges, the discount has been further deepened to an unprecedented level of at least 95%, they said.

Paperfly has been grappling with financial difficulties in recent times, attributing the challenges to the non-disbursement of pledged funding from its foreign investors and funds entangled in the complications of CVC Finance, a non-bank financial institution.

But in a surprising turn of events, the smart logistics startup company revived its picking and delivering operations for e-commerce orders on 1 November.

"Emerging from the recent challenges, we have successfully reinstated our e-commerce order delivery services across Bangladesh since early November," said the Paperfly co-founder.

"We resumed operations on a limited scale, but we anticipate significant growth soon," the co-founder added. 

The comeback

Paperfly's revival was primarily driven by its partnership with Daraz, the largest e-commerce platform in Bangladesh. The company played a pivotal role in delivering a substantial portion of Daraz's surge in orders during the 11:11 campaign, the year's biggest online sale event.

"Daraz will continue utilising Paperfly's services as the company's internal logistics arm cannot handle its regular order volume. Additionally, third-party logistics providers play a crucial role in managing the surge in orders during campaign periods," said AHM Hasinul Quddus, the chief corporate affairs officer at Daraz.

The e-commerce market in Bangladesh had a sharp growth during the pandemic, partly thanks to several errant platforms including Evaly, Dhamaka, Eorange, and Alesha Mart.

Since the fall of these platforms in mid-2021, e-commerce had a hiccup and rebounded with the organic demand growth later.

In a year, a fuel price hike that increased the cost of delivery, import restrictions and most importantly the inflation-hit consumers' tightened belt hurt the growth of e-commerce again while the world's investors took a complete U-turn by becoming conservative in pouring their funds for startups' scaling up at any cost.

The major smart logistics firms in Bangladesh, which depended on serving small and medium online merchants are in a better situation nowadays and the firms that prioritised large e-commerce platforms for bulk orders suffered a significant slowdown.