Elbee Plans 50:50 Venture With Ups
Elbee Services plans to enter into a 50:50 joint venture with the $18-billion United Parcel Service (UPS) of the USA.
Elbee, which currently has a strategic alliance with UPS, secured the approval of its shareholders at an extraordinary general meeting in Mumbai on Thursday for the venture, with an initial share capital of Rs 20 crore.
The joint venture will be only for the international leg of the business in the countrys four metros, said Sandip Shah, chairman and managing director, Elbee Services at the EGM.
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Shareholders at the EGM also approved resolutions to hike the authorised share capital of the company from Rs 30 crore to Rs 35 crore, to raise the FII stake in the company to the permissible limit of 30 per cent, and increase the borrowing limit of the company to Rs 200 crore. Another resolution to invest Rs 25 crore in subsidiary Elbee Airlines too was passed.
Shah, however, declined to give further details about the joint venture on grounds that discussions were in the preliminary stage. The company reiterated this in a fax to Business Standard which said,
Discussions are at the preliminary stage and the ordinary resolution passed at the EGM authorising the board to make investments in the proposed joint venture has been done to facilitate the process of discussion in the best interest of the company. No other details on the above subject can be provided at this point of time.
The proposal for a joint venture comes in the face of reports that the relationship between the two companies in the last two years has been far from amicable. Market sources say that the relationship turned sour about two years ago with UPS insisting that Elbee concentrate more on the international business.
Elbee, however, decided to concentrate more on the domestic business but it soon realised that the yield in the domestic business was less due to the presence of a large unorganised sector. Later, the company put in determined efforts to refocus on the domestic sector, but found that it had lost substantial ground to competitors like DHL, according to market sources.
Meanwhile, UPS too wanted a larger chunk of the international business emanating from India. A joint venture made sense as infrastructure costs would be substantially lower compared to setting up shop on its own, market sources said.
The turn to the Elbee-UPS alliance comes in the wake of a recast of the Federal Express-Blue Dart alliance. FedEx, which till recently had a principle to principle relationship with Blue Dart, has now set up its own liasion office in India and handles the marketing and customer service of the international business.