Logistics industry in India contributes around 14% of the country's GDP at close to $400bn with just the transportation segment contributing 40-50% of its value. Having been impacted severely by the Covid-19 pandemic, the road transport industry has bounced back sharply and is expected to grow at 8% CAGR over the next few years to reach $330bn by FY25. This market is highly fragmented and unorganised with multiple layers in the value chain including the shipper, transporter, broker and truck owner, many of whom are either individuals or small businesses.
Krab specifically targets one middle layer in the logistics ecosystem called the transporter. The transporter is a critical layer in the chain and takes the financial risk by paying the advance to the vehicle supplier, so that the goods can be moved from point A to B. Further, they can only raise an invoice to the shipper after receiving proof-of-delivery, which can take upto 2-3 weeks from the day the goods are shipped and payment can take upto 60-90 days.
India has about 300,000 transporters with 90% being small and medium sized with very limited or no access to formal credit and the majority depend on hiring market vehicles to fulfill orders. The lack of formal credit is mainly due to a lack of credit history/credit score, limited information and data (including access to alternative data), lack of collateral and small loan size, combined with high CAC and high loan servicing & collection costs.
Additionally, transporter operations are also quite inefficient and manual in nature with the vast majority still using manual processes and ledgers for creating lorry receipt/bilti, sending invoices and reminders, tracking outstandings and coordinating with the many layers involved in each trip.
Krab is building a simple trip financing product to help transporters get instant loans from lenders, which helps them solve a critical working capital (and growth capital) problem, while also providing them with simple accounting and invoicing tools to organise and automate their operations. The financing and software solutions complement each other, as demand for credit drives software tool usage and software tool usage provides new customers at zero CAC and alternative data for lending.
Vijay and Yogesh have worked together for over 5 years at their last logistics startup, which they bootstrapped profitably to over $20mn annual revenue. The pain points they faced in this previous venture was the starting point for Krab and the team is using their deep domain insights into the logistics sector, the transporter ecosystem and customer behavior to build the product.
Super excited to have partnered with them very early in their journey and the team has found a very interesting, differentiated wedge into the logistics ecosystem, which we believe can expand in multiple ways.