Delhivery Limited IPO: All You Need to Know
The IPO frenzy within the Indian startup ecosystem resumes! Logistics and supply chain startup Delhivery has launched its three-day initial public offering (IPO). In this article, learn all about the company and its IPO.
Company Profile - Delhivery Limited
Delhivery Ltd is the fastest-growing fully integrated player in the logistics services market in India in terms of revenue as of FY21. The Gurgaon-based firm offers a wide range of logistics services, including express parcel delivery, heavy goods delivery, truckload freight, warehousing, cross-border express, and supply chain software. They also offer value-added services like e-commerce return services, payment collection & processing, installation & assembly services, and fraud detection.
Delhivery’s customers primarily include e-commerce marketplaces, direct-to-consumer (D2C) e-tailers, and small & medium enterprises (SMEs).
As of December 31, 2021 (Q3 FY22), the company’s total active customer base stood at 23,113. It posted a Rate Automated Sort Capacity of 3.70 million shipments per day during the same period. Delhivery has built a pan-India network. It services 17,488 PIN codes, covering 90.6% of the total 19,300 PIN codes in India! Its network infrastructure includes 124 gateways, 20 automated sort centres, 83 fulfillment centres, 35 collection points, 24 returns processing centres, and 2,235 direct delivery centres.
The size of the company's active customers has grown four times in the last three financial years. They have also seen significant growth in PIN code reach and delivery points. Since its inception, Delhivery has invested heavily in cutting-edge engineering and technological capabilities to drive growth. They are backed by prominent venture capital firms like SoftBank and Tiger Global.
About the IPO
Delhivery Ltd's public issue opens on May 11 and closes on May 13. The company has fixed Rs 462-487 per share as the price band for the IPO.
The fresh issue of shares (of the face value of Rs 1 each) aggregates to Rs 4,000 crore. The IPO also includes an offer for sale (OFS) by promoters and early investors, aggregating to Rs 1,235 crore. Individual investors can bid for a minimum of 30 equity shares (1 lot) and in multiples of 30 shares thereafter. You will need a minimum of Rs 14,610 (at the cut-off price) to apply for this IPO. The maximum number of shares that can be applied by a retail investor is 390 equity shares (13 lots).
Delhivery will utilise the net proceeds from the IPO for the following purposes:
- Funding organic growth.
- Funding inorganic growth through acquisitions and strategic initiatives.
- General corporate purposes.
Delhivery Ltd is yet to post profits. However, its revenue growth has been impressive. The company’s topline has grown at a CAGR of 48% from FY19 to FY21. Revenue from contracts rose 31% YoY to Rs 3,647 crore in FY21. Like most startups, Delhivery has been burning cash to focus on scaling its operations. It posted a negative free cash flow of Rs 246 crore in FY21, compared to Rs 848 crore in FY20. It may take them a few years to achieve profitability.
Freight, handling, and servicing costs surged to Rs 3,480 crore during the first nine months of FY22 from Rs 2,026 crore in FY21.
- Delhivery has a history of losses and negative cash flows from operating and investing activities.
- The company relies on a scaled, automated, and unified network infrastructure for its business operations. The inability to maintain or expand its network infra will adversely affect its overall performance.
- Any disruptions in Delhivery’s logistics and transportation facilities will severely impact its financial condition.
- The company faces risks associated with shipments handled and transported through its network, which may not be fully covered by insurance policies.
- Delhivery’s business and growth are highly correlated with the growth of India’s e-commerce industry. The inability to efficiently diversify into other industry verticles could harm its overall operations.
IPO Details in a Nutshell
The book-running lead managers to the public issue are Kotak Mahindra Capital, Morgan Stanley India, BofA Securities India, and Citigroup Global Markets India. Delhivery Ltd filed the Red Herring Prospectus (RHP) for its IPO on April 30. You can read it here. Out of the total offer, 75% is reserved for Qualified Institutional Buyers (QIBs), 15% for Non-Institutional Investors (NIIs), and 10% for retail investors.
Ahead of the IPO, Delhivery raised Rs 2,347 crore from 64 anchor investors.
The Indian logistics sector has been progressing at a rapid pace as a result of the constant growth of e-commerce platforms. It has become vital to our country’s overall economic growth. According to Delhivery’s RHP, the logistics sector is expected to grow at a CAGR of 9-10% to ~Rs 28.1 lakh crore by FY26! Delhivery’s long-term growth is heavily dependent on its ability to control costs. It may also need to pass on any increase in operating expenses to customers. The company has planned to use the issue proceeds to scale up its existing business by setting up offices and expanding the support team.
Delhivery will be directly competing with leading firms such as Blue Dart Express, TCI Express, Allcargo Logistics, and Mahindra Logistics once it gets listed.
The company’s IPO shares are trading at a premium of Rs 7 in the grey market. Before applying to this IPO, we will wait to see if the portion reserved for institutional investors gets oversubscribed. As always, consider the risks associated with the company and come to your own conclusion.
What are your views on Delhivery Ltd’s IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.