B2B start-up ElasticRun takes a step back, to focus on core strategy

The current funding winter has prompted start-ups to refocus on their core strategy and be selective on expansion.

Business-to-business (B2B) start-up ElasticRun is one such firm, which has decided to focus on its core business and wind up expansion projects.

The SoftBank and Prosus Venture-backed ElasticRun, which typically runs distribution for fast-moving consumer goods (FMCG) products in rural areas, decided to cater to retailers within city limits. These urban markets already have a robust infrastructure in place due to companies having direct distribution.

The company had taken this bet nine months ago. However, it has been put off as this would mean higher cash burn and capex investment in order to take on the intense competition from rivals. Some cities where it has wound up include Bhopal, Indore and Delhi.  

As part of this foray, the company hired some warehouses as well as people to cater to the urban market. 

“We initiated a pilot for serving our customers in urban markets. But during the year, as the macro changed, we decided not to pursue the urban pilot and focus on our core rural business.

As part of this restructuring, we have to part ways with almost 2 per cent of our employees,” said Sandeep Deshmukh, co-founder and chief executive officer (CEO), ElasticRun.

ElasticRun extends the reach of a brand’s direct distribution network to deep rural markets. It enables access to new stores and customers for the brands. These were not accessible through traditional distribution networks.

The urban segment foray is just about 1.2-1.5 per cent of the company.

For ElasticRun, its maximum revenue comes from smaller or rural markets.

“We have a deeply-entrenched B2B kirana business in rural markets. We have very strong partnerships with national and regional FMCG brands. This rural business has been growing at an extremely high pace over the last three years. FY23 has been a bumper year for us,” he added.

According to data from Tofler, ElasticRun reported consolidated revenue of Rs 3,824.9 crore in FY22, a growth of 2.5 times from Rs 1,0871.1 crore in FY21.

Since the company expanded its distribution networks pan Indian, its losses also burgeoned. For FY22, the company’s net loss came in at Rs 372.88 crore from the previous year’s Rs 101 crore.

Owing to this roll back, ElasticRun had to lay off employees.

Though the company absorbed over 40 per cent of the impacted employees, those who did not move to smaller towns were asked to go.

“We are aggressively hiring in rural business. At an organisational level, we have been a net positive hirer for the past few quarters. We are one of the largest recruiters for Indian upcountry markets,” he added.

Deshmukh said that the company, which has a total headcount of 3,000, will end the financial year with 3,300 employees.

“Rural segment generates over 98 per cent of our overall business. This business continues to rapidly grow in different geographies,” shares Deshmukh.

He also added that from a funding point, ElasticRun is perhaps among a handful of unicorns that are sitting on a strong bank balance.

“We have raised $330 million last year. Most of this money is in the bank, unutilised. The company has an extremely strong cash position and we are very well-funded for a long journey,” he added.

Some of the brands that ElasticRun works with include Marico, Godrej, Johnson & Johnson, ITC, Britannia and Reckitt Benckiser, among others. ElasticRun has presence in 26 states, reaching out to over 80,000 villages and has over 400 brands.