Delhivery delivers parcels to over 90 percent of India, but will its IPO deliver returns to its investors?

Logistics and supply chain company Delhivery is all set to launch its ₹5,235 crore initial public offering (IPO) tomorrow from May 11 to May 13.

The company has reduced issue size to ₹5,235 crore from ₹7,460 crore it had decided earlier because of volatile market conditions and the ₹21,000 crore LIC IPO which could suck out the liquidity from the market.

Delhivery’s public issue, which aims at mopping up INR 5,235 crore from the market, includes ₹4,000 crore worth fresh equity shares and ₹1,235 crore via sale of shares by existing investors via the offer for sale (OFS) route. Shareholders like Carlyle, Japanese Softbank, Fosun group-owned China Momentum Fund and Times Internet will sell some of their shares in the IPO.

Delhivery provides a full range of logistics services, including express parcel delivery, heavy goods delivery, PTL freight, TL freight, warehousing, supply chain solutions, and cross-border services, among others.

Delhivery is raising funds to fuel its future growth

The company has proposed to use the net proceeds from the IPO to fund its acquisitions and expansion plans, with an eye on future growth.

In August 2021, Delhivery had acquired Spoton to scale their PTL freight services business.

The company’s express parcel delivery network services 17,500 pincodes, covering 90.6% of the total 19,300 pincodes in India.

The size of the company’s active customers have grown four times in the last three financial years along with good growth in pincode reach and delivery points.

Pincode reach16,67715,87513,485
Infrastructure (in million square feet)12.239.855.96
No. of delivery points3,3822,9732,258
Team size53,08640,41628,830
No. of active customers16,7417,9574,867

What are the analysts saying – should you subscribe to the Delhivery IPO or not?

However, despite meaningful growth in its service offerings and revenue, Delhivery is still incurring losses. This is one of the reasons some analysts have recommended investors to skip the IPO.
Analysts at BP Equities suggest investors avoid the IPO, saying that it is similar to new age firms like Zomato, PayTM which have disappointed investors and wiped out a considerable portion of their investments.

At the upper end of the price band, the issue is aggressively priced, says a report by BP Equities.

“Despite an 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,” added the report.

It is worth mentioning that although the company is still not profitable, its losses have reduced by four times in FY 2021-22 when compared to FY 2019-20.

FY21₹3,838 crore-₹415 crore
FY20₹2,988 crore-₹268 crore
FY19₹1,694 crore-₹1,783 crore

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