Kotak retains ‘buy’ on Delhivery, says firm’s network strengths to boost performance

Delhivery (File pic)

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26 Aug, 2025 12:21

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Logistics firm Delhivery’s focus on building an automated ‘mesh’ network (which means option of direct routes across any two points) will enable it to capture a bigger pie of India’s logistics market, as per Kotak Institutional Equities.

In a note on key takeaways from Delhivery’s Tauru plant Analyst Meet, the brokerage said the facility now serves 126 direct routes versus 50 a few years ago.

“It is testament to the level of automation in decision-making and the extent of loads that make a lot more direct connections possible… Tauru is also clearing inventory 10 times a day (14 times in peak season) versus 1X for peers,” it highlighted.

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Kotak said Delhivery’s ‘mesh’ network makes more sense for a logistics market as dynamic and spread out as India's, compared to the traditional hub-and-spoke model.

While a typical hub-and-spoke model has fixed routes where the shipments wait till there is maximum capacity for a particular route, mesh network is a dynamic mapping algorithm where the shipments are constantly loaded, routing through the maximum delivery date a customer might tolerate and minimum cost that can be incurred.

“This essentially increases inventory turnover at gateways to 10X compared to any other player which is at 2X and at the same time 70 percent of the shipments are through direct routes owing to higher loads, and the percentage is much lower for a hub-and-spoke player,” it added.

Hub-and-spoke players are limited in the number of scales they can achieve, as a hub requires higher fixed costs and has lower inventory turnover compared to a mesh network, where the algorithm optimizes to the most cost-effective way possible in real time.

Also Read: MF romance with logistics deepens with Delhivery, but fizzles out for Gati

The mesh network is essentially capable of capturing external factors such as road blocks and weather conditions in real time, allowing Delhivery to act quickly and in a cost-effective manner, the note mentioned.

Competing Moves

The brokerage also played down the tactics adopted by some of Delhivery’s peers.

“Amazon externalizing its logistics network to compete with Delhivery on logistics cost appears disconnected from its core business and a very difficult strategy to execute, as per Delhivery (and we agree),” it said.

In addition, Meesho acting as an aggregator is unlikely to have an effect on the business of the carrier with a bundled offering in Delhivery, it added.

Also Read: Delhivery Q4 losses widen to Rs 159 crore as revenues fall for the 2nd quarter

“We expect the ecosystem to realize over time that logistics is a commodity business that is best done through the mesh network of Delhivery,” Kotak said.

Retaining its ‘buy’ rating on the company, Kotak put the stock’s fair value at Rs 410. Based on the current market price of Rs 357, this represents a potential upside of nearly 15 percent.

Delhivery's net loss widened to Rs 159 crore in the fourth quarter ended March 2023, compared to the corresponding period previous year, as the logistics company's revenue dropped for the second straight quarter amid a slowdown in e-commerce.

Delhivery reported an operating income of Rs 1,859.6 crore for the quarter ended March 31, 2023, 10 percent lower than Rs 2,017 crore in the same period last year. The logistics company had a net loss of Rs 119.8 crore in the fourth quarter of FY22 (2021-22).

Shares of the company are up 7.5 percent on YTD basis, though it is down 30 percent over the past year.

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