Delhivery IPO: All you need to know

Delhivery is the largest fully integrated logistics services company in India by revenue. It has built a network covering every state, servicing 17,045 PIN codes or 88 percent of the 19,300 PIN codes in India. The Gurugram-based company became a unicorn – valued at over $1 billion – when it raised $413 million in a Series F round led by SoftBank Vision Fund in 2019.

Top things to be noted while applying for the Delhivery IPO:

1. The company cut the size of the IPO to Rs 5,235 crore from Rs 7,460 crore planned earlier. It will raise Rs 4,000 crore via a fresh issue of shares. The offer for sale by existing shareholders is expected to fetch Rs 1,235 crore.

2. Allotment 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.

3. Delhivery shares have fallen almost 40 percent in the unlisted market from a peak of Rs 950 apiece in January. The stock is quoting at Rs 550-600 on thin trading volumes, a dealer said.

4. Delhivery has never reported a profit, according to its share-sale prospectus. The company made a loss 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 ended December and Rs 3,838 crore in FY21.

5. It reported a negative free cash flow of Rs 246 crore in FY21 versus Rs 848 crore in FY20. Freight, handling and servicing costs rose to Rs 3,480 crore in the first nine month of FY22 from Rs 2,026 crore in FY21.

6. The company’s annualised sales will be Rs 6,413 crore and it’s demanding 5.5x price to sales. Other logistics companies are making profit. The combined market capitalisation of TCI Express, Blue Dart, Gati, VRL Logistics, and Mahindra Logistics is less than the expected market cap of Delhivery of about Rs 35,000 crore.

7. Analysts said the company’s valuation is expensive. “Given fuel cost increases, supply chain and logistic issues, the costs for fulfilment will keep pinching them more. There are better players in the listed space already making profit and as an investor, one can look at them. Future equity dilutions are also an overhang as the company may need to keep diluting to keep doing their capex as logistics is a very capex-heavy business. To augment their capabilities, they need to invest in physical infra to fulfil those incremental orders which will add to costs,” said Aditya Kondawar, an independent IPO analyst.

8. Analysts said some of the key risks that are material to the operating model of Delhivery include: heavy dependence on e-commerce despite diversifying into other industry verticals, dependency on network partners and other third parties for transportation vehicles and staff, lower entry barriers in many of the segments in which it operates, which has increased competition from organised and unorganised players, and dependency on certain large customers who contribute significantly to its business.