Delhivery says it has ‘zero incentive’ to join Meesho’s logistics platform

Delhivery has swung back to the black in Q1 of FY25

Delhivery won’t unbundle its services to join a logistics aggregation platform started by e-commerce unicorn Meesho, which has hurt shipment volumes of the third party logistics player, the company’s management indicated in a call with analysts.

“Why will we do that? The incentive for us to unbundle is zero,” Delhiver CEO Sahil Barua said on August 2 when an analyst asked if the company might join Valmo, which was launched by Meesho earlier this year.

“It is also not in the interest of customers to disintermediate ourselves… The cost curve flattens quickly when you run a parcel-only network,” he added.

Meanwhile, Delhivery’s revenue rose 13 percent to Rs 2,172 crore in the June quarter (Q1) and swung back to black with Rs 54-crore net profit, amid a broader slowdown in the e-commerce sector which the logistics company primarily caters to.

The company logged revenue of Rs 1,930 crore in the year-ago period, while net loss was Rs 89 crore.

After posting a surprise net profit for the first time in the December quarter last year, which coincided with a seasonal spike in e-commerce sales due to festivities, Delhivery slipped back into the red in the March quarter this year.

Delhivery stock price on the BSE rose 2 percent during the day to close at Rs 416.1 apiece.

Impact of Valmo

Delhivery’s shipment volumes are bound to be impacted for a while as Meesho, the largest customer in the third-party logistics space with about 50 percent market share, is moving its deliveries to an in-house system called Valmo, according to a recent report by brokerage firm Bernstein.

According to the brokerage firm’s note in May, Valmo currently handles 20 percent of Meesho's total volumes and plans to increase this to 40 percent in the next few months. Further, Valmo has established a reach of 5,000 pin codes and claims that its cost per parcel is about 5 percent lower than that of 3PLs, and it sees a scope of 5-7 percent more savings in the next 12-18 months.

For this reason, coupled with management exits and issues with the company's business execution, the brokerage firm had downgraded Delhivery, calling it ‘volatile’ and an ‘unstable ship’.

“Delhivery is a volatile company. In some quarters, it has struggled with its PTL business, led by Spoton integration issues, and some due to weak Ecom business (Shopee exit, peak season execution issues, etc). Meesho's insourcing is now affecting it. This, coupled with senior management exits, suggests that the ship is still unstable,” Bernstein analysts wrote in the note.