Delhivery Ltd.: Avoid

  • Date

    11 May 2022 - 13 May 2022

  • Price Range

    ₹462 - ₹487

  • Minimum Order Quantity

    29

  • (D) RHP

    View

Delhivery Ltd. was incorporated on 22nd June 2011. Delhivery is India’s largest and fastest-growing fully-integrated logistics services player by revenue as of FY 2021. The company aim to build an operating system for commerce. Their business is guided by three principles i) people centricity; ii) growth through partnership; iii) efficiency. Delhivery provided supply chain solutions to a diverse base of 23,113 Active Customers such as e-commerce marketplaces, direct-to-consumer e-tailers and enterprises and SMEs across several verticals. Their in-house logistics technology stack is built to meet the dynamic needs of modern supply chains. They have over 80 applications through which they provide various services. Delhivery operates a pan-India network and provides its services in 17,488 postal index number (“PIN”) codes, as of Dec 31, 2021. Company’s express parcel delivery network, which serviced 17,488 PIN codes in the 9 months ended Dec 31, 2021, covering 90.61% of the 19,300 PIN codes in India.
Objects of the issue:
The IPO aims to utilize the net proceed for the following objectives;
  • Funding organic growth initiatives.
  • Funding inorganic growth through acquisitions and other strategic initiatives.
  • General corporate purposes.
Investment Rationale:
Proprietary logistics operating system
Delhivery is the largest integrated and fastest growing fully integrated logistics services player in India by revenue as of FY21. Their revenue from contracts with customers has grown from INR16.5bn in FY19 to INR 36.5bn in FY21, or a CAGR of 48.5%. Further, the revenue from contracts with customers has improved from INR 26.4bn for the 9MFY21 to INR 48.1bn for the 9MFY22, or an increase of 81.9%. The company’s network structure, quality of engineering and technology and data intelligence capabilities have helped them establish scale in all of their business lines and ensure synergies across them. This has driven higher network utilization, resulting in cost efficiencies while maintaining service speed and reliability. At the upper end of the price band, the issue is valued at a Price/Sales of 5.5x based on FY22 annualized sales, which we believe is aggressively priced. Moreover, despite improvement in the topline, the company continues to make losses. As we are witnessing the negative market sentiment towards the similar category stocks (Zomato, PayTM), we suggest investors to “Avoid” this issue.