Shares of logistics and supply-chain startup Delhivery Ltd are down nearly 40 percent in the unlisted market from the peak of Rs 950 apiece in January ahead of its initial public offering (IPO).
The stock is quoting at Rs 550-600 per share on thin trading volume, a dealer said.
Delhivery has set the price band in its IPO at Rs 462-487 a share, valuing the company at Rs 35,283 crore at the top end. This is down about 19% from the current unlisted price. The IPO will open for subscription on May 11 and close on May 13, the company has said.
The sharp fall as well as the price band has unsettled investors who acquired stock from the unlisted market, analysts said.
Trading volume in Delhivery shares in the unlisted market has been low from the beginning because of its expensive valuation, which kept investors away, the analysts said.
Investors expected the IPO to be at a lower valuation compared to that in the unlisted market and preferred to wait for the share sale rather than buy the stock in the unlisted space. Sentiment on new-age companies has also drastically changed after failure of some start-up IPOs last year, analysts added.
"There was robust demand for Delhivery's unlisted shares last year, when they were not available, and now when the shares are trading in the unlisted space, the demand is completely lacking," said Manan Doshi, co-founder, UnlistedArena.com, which deals in unlisted and pre-IPO shares.
To be sure, Delhivery is not the only company to have set a price band that is far lower than the prevalent stock price in the unlisted market.
AGS Transact Technologies Ltd, UTI Asset Management Co Ltd and PB Fintech’s IPO price bands had been below unlisted market levels, too.
AGS Transact listed in January 2022 and its price band was set at Rs 185-195 a share; its unlisted shares were trading at Rs 550 apiece before its IPO. UTI AMC listed on exchanges in September 2020 and its price band was Rs 552-554 a share; its unlisted market price just before the IPO was Rs1,100. PB Fintech, parent of Paisabazaar, set an IPO price band of Rs 940-980; its shares were quoting around Rs 1,900 apiece just before the IPO.
Financial metrics
Delhivery’s financials aren’t that great. It 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 in FY21 it posted a Rs 416 crore loss. Revenue in the nine months ended December was Rs 4,911 crore; FY21 revenue was Rs. 3,838 crore.
In FY21, it reported a negative free cash flow of Rs 246 crore versus Rs 848 crore in FY20. At the same time, freight, handling and servicing cost has gone up from Rs. 2,026 crore in FY21 to Rs 3,480 crore in 9MFY22.
"The firm is demanding 5.5x price to sales. All other logistics players are making profits. 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 profits and as an investor , one can look at them," said Aditya Kondawar, IPO expert at JST Investments.
The firm will list on the exchanges on May 24. The basis for allotment will be May 19 and the shares will be credited to the demat accounts of investors on May 23. The firm has cut its total issue size to Rs 5,235 crore from Rs 7,460 crore planned earlier. It will now raise Rs 4,000 crore via a fresh issue and Rs 1,235 crore through an offer for sale.
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