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Delhivery Ltd is the most rapidly growing and fully integrated player in the logistics services demand in India in terms of revenue as of FY21. The Gurgaon-based company offers a wide range of logistics services, containing express parcel delivery, heavy goods delivery, truckload freight, warehousing, cross-border express, and supply chain software. They even offer value-added services like e-commerce return services, payment collection & processing, installation & assembly services, and fraud detection. Delhivery’s clients primarily have e-commerce marketplaces, direct-to-consumer (D2C) e-tailers, and small & medium enterprises (SMEs).
As of December 31, 2021 (Q3 FY22), the company’s complete active customer base stood at 23,113. It published a Rate Automated Sort Capacity of 3.70 million shipments per day during the same time. Delhivery has created a pan-India network. It services 17,488 PIN codes, covering 90.6% of the total 19,300 PIN codes in India. Its network infrastructure has 124 gateways, 20 automated sort centers, 83 fulfillment centers, 35 collection points, 24 returns processing centers, and 2,235 direct delivery centers. The size of the company’s active clients has grown four times in the last three financial years. They have also seen substantial growth in PIN code reach and delivery points. Since its inception, Delhivery has invested heavily in cutting-edge engineering and technological capacities to drive evolution. They are backed by major venture capital enterprises like SoftBank and Tiger Global.
Top Things to be Cited While Applying for the Delhivery IPO
- The company shortened the size of the IPO to Rs 5,235 crore from Rs 7,460 crore arranged earlier. It will extend Rs 4,000 crore via a fresh issue of shares. The offer for sale by existing shareholders is predicted to fetch Rs 1,235 crore.
- The distribution of shares to successful applicants will be on May 19 and their accounts will be credited on May 23, a day before they are listed on the stock exchanges.
- Delhivery shares have dropped almost 40 percent in the unlisted market from a height of Rs 950 apiece in January. The stock is quoting at Rs 550-600 on light trading volumes, a dealer said.
- Delhivery has never declared a profit, according to its share-sale prospectus. The company made a flop of Rs 891.14 crore for the nine months ended December 2021 and posted a Rs 415.7 crore loss in FY21. Revenue was Rs 4,911 crore in the nine months finished December and Rs 3,838 crore in FY21.
- It noted a negative free cash flow of Rs 246 crore in FY21 versus Rs 848 crore in FY20. Freight, handling, and servicing expenses increased to Rs 3,480 crore in the first nine months of FY22 from Rs 2,026 crore in FY21.
- The company’s annualized sales will be Rs 6,413 crore and it’s demanding a 5.5x price to sales. Other logistics companies are earning profit. The combined market capitalization of TCI Express, Blue Dart, Gati, VRL Logistics, and Mahindra Logistics is less than the typical market cap of Delhivery of about Rs 35,000 crore.
- Analysts said the company’s valuation is costly. “Given fuel cost boosts, supply chain, and logistic issues, the costs for fulfillment will keep pinching them more. There are better players in the listed space already making a profit and as an investor, one can look at them. Future equity dilutions are also an overhang as the company may require to keep diluting to keep doing their Capex as logistics is a very Capex-heavy business. To expand their capabilities, they need to invest in physical infra to fulfill those incremental orders which will add to costs,” said Aditya Kondawar, an independent IPO analyst.
- Analysts said some of the key risks that are material to the working model of Delhivery include: heavy dependence on e-commerce despite diversifying into other industry verticals, reliance on network partners and other third parties for vehicles and staff, lower entry barriers in many of the segments in which it operates, which has improved competition from methodical and unorganized players, and dependency on certain large customers who contribute significantly to its business.
- Delhivery has a history of failures and negative cash flows from working and investing activities.
- The company depends on a scaled, automated, and unified network infrastructure for its business processes. The incapability to preserve or expand its network infra will adversely affect its overall performance.
- Any troubles in Delhivery’s logistics and transportation facilities will severely affect its financial condition.
- The company meets risks associated with shipments handled and transported through its network, which may not be fully covered by insurance policies.
- Delhivery’s business and growth are highly associated with the growth of India’s e-commerce industry. The incapability to efficiently diversify into other industry verticles could damage its overall operations.
The Indian logistics sector has been advancing at a rapid pace as a result of the constant growth of e-commerce platforms. It has become important to our country’s overall economic growth. According to Delhivery’s RHP, the logistics sector is anticipated to grow at a CAGR of 9-10% to ~Rs 28.1 lakh crore by FY26! Delhivery’s long-term development is heavily dependent on its ability to control costs. It may also require passing on any growth in operating expenses to customers. The company has prepared to use the issue proceeds to scale up its existing business by setting up offices and developing a support team. Delivery will be directly contending with leading firms such as Blue Dart Express, TCI Express, Allcargo Logistics, and Mahindra Logistics once it gets documented.
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