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IPO of Delhivery Ltd – Investor Information Note

delhivery ipo - tradeplus blog

Delhivery Ltd is an 11 year old integrated logistics company and is one of the fastest growing players in the field. Its model offers massive coverage and technology is a strong digital enabler to its model. Delhivery Ltd provides supply chain solutions to over 23,000 customers across India and predominantly caters to the supply chain needs of e-commerce market-places, DTC e-tailers and SMEs. Delhivery basically caters to the modern supply chains. It is also a data and intelligence driven logistics player, which offers a unique positioning.

Delhivery Ltd operates a total of 21 fully and partially automated sortation centres plus 82 gateways across India. It has a capacity of about 3.7 million shipments in a day through its unmatched pan-India coverage of over 17,488 PIN codes. Its actual delivery is done through a synergistic network of delivery and feet-on-street partners. Delhivery Ltd focuses more on the intellectual property (IP) aspects and the process flow and the technology enablement of the process flow. Delhivery Ltd covers nearly 90.6% of the available PIN codes in India. The IPO size has been toned down by nearly 30% compared to its original planned IPO size of Rs.7,460 crore due to the negative headwinds in the geopolitical situation globally.

Here are 3 important things that you must know about the DELHIVERY LTD IPO before deciding whether to apply or not.

  1. With the use of technology and selective outsourcing, Delhivery has developed the ability to serve over 23,000 customers across over 17,400 PIN codes.

  2. Out of the fresh issue of Rs.4,000 crore, the company will use Rs.2,000 crore for funding organic expansion and Rs.1,000 crore for funding inorganic growth plans, both being value accretive for the company from a medium to long term perspective.

  3. In the latest 9 months to Dec-21, nearly 62% of its revenues come from Express Parcel Services, 18% from truck load services and over 7% from supply chain services. The gradual shift to value added services assures the company better margins in future.

Capital issue structuring for the Delhivery Ltd IPO

  • The Delhivery Ltd IPO entails the issue of 10,94,74,867 shares in the price band of Rs.462 to Rs.487. Issue size at upper price band works out to Rs.5,235 crore.

  • The offer for sale (OFS) portion will entail the issue of 2,53,59,343 shares which at the upper price band of Rs.487 works out to a value of Rs.1,235 crore.

  • The fresh issue component will entail the issue of 8,21,35,524 shares, which at the upper price band of Rs.487 works out to Rs.4,000 crore.

  • There is no promoter group in Delhivery Ltd, being a professionally managed company. Hence only the holdings of the predominant public shareholders will change.

  • The company has also reserved up to 4.32 lakh shares for preferential allotment to the employees of Delhivery Ltd.

Application options for retail investors in Delhivery Ltd IPO

The investor lot is 30 shares and in multiples of lots of 30 shares thereof. Check the table for different investment options available to the retail investor.

In short, the retail investors can start with application of 1 lot of 30 shares and go all the way up to 13 lots (390 shares) worth Rs.189,930.

Delhivery Ltd of India IPO – Key Financial Parameters

Since Delhivery is a loss making company at an operating level and at a bottom line level, traditional valuation parameters will not apply. However, the company valuation discounts the annual sales at around 10 times and for a fast growing digital pitch, the important factor is that the cash burn has been narrowing on a consistent basis.

Delhivery Ltd IPO – How should investors approach the investment decision?

While it is advisable to consult with your financial advisor before taking an IPO investment decision, here are some factors to consider ahead of the IPO issue.

  1. Delhivery Ltd has reported CAGR revenue growth of 48.5% over the last 2 years and FY22 has seen the best traction in growth in recent times.

  2. The technology platform that supports the backbone of Delhivery Ltd is entirely developed in-house with state of the art expertise and is a major IP factor for Delhivery.

  3. Since the company leverages on vast amount of data and algorithms to serve supply chain logistics, it is not only in a high growth segment but also opens up new vistas.

  4. The company has created an asset light business model which leverages on proprietary technology but depends on a network of partners for variable cost based delivery. This enables scaling at low cost and in a ROE accretive manner.

While in terms of top line, Delhivery is larger than Blue Dart and Mahindra Logistics, it is a loss making logistics play. In terms of price/sales valuation, Delhivery IPO is at twice that of Blue Dart, although the IP factor will have to be considered. Investors must also invest cautiously and only with a long term perspective, considering the recent experience of digital plays in the stock market place.

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