Delhivery Limited IPO Updates - Swastika Investmart Swastika
Delhivery Limited IPO

Delhivery Limited IPO

About Delhivery Limited IPO

  • Delhivery Limited (“Delhivery”) was incorporated on June 22, 2011. Delhivery is the largest and fastest-growing fully-integrated logistics services player in India by revenue as of Fiscal 2021.
  • 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 collects, structures, stores and processes vast amounts of transaction and environmental data to guide real-time operational decision making.
  • Delhivery operated 21 fully and semi-automated sortation centres and 82 gateways across India (excluding Spoton) as of December 31, 2021.
  • They had a Rated Automated Sort Capacity of 3.70 million shipments per day as of December 31, 2021.
  • Delhivery operates a pan-India network and provides its services in 17,488 postal index number (“PIN”) codes, as of December 31, 2021.

 

Outlook & Valuation:

The company has a good track record of execution built on its proprietary technology and has scaled up significantly since its incorporation in 2011 to emerge as the largest fully-integrated logistics player in the country. The runway of opportunity also appears good given India’s long-term growth prospects and the crucial role logistics plays when it comes to commerce. Another point to note is that, in India, the share of organized players is much lower compared to developed countries.

It reported revenue from operations of ₹4,811 crores for the nine months ended December 21. Annualizing this implies a very strong FY19-22 revenue CAGR of around 57 per cent. However, the high growth of the company is due to the acquisitions made, organic growth has been slower in comparison to overall growth. The company does not have a past track record of profitability given its focus on growth. While it has reached near break-even on an adjusted EBITDA basis for nine-month FY22 (adjusted EBITDA margin of negative 0.72%), the profitability at net profit levels is yet to be seen and depends on a lot of variables in the future. Investors need to note that the logistics business is a low-margin business and the scale of operation determines the profitability due to operating leverage.

Nevertheless, the current market environment is not conducive to aggressive risk-taking when it comes to unprofitable companies. The issue is priced at a Price to Sales ratio of 5.4 (based on annualized revenues of 9 months ending December 2021). We suggest investors enter the company post listing after analyzing how the business evolves in terms of revenue growth and profitability. Thus, we recommend “Avoid” the issue.

 

KEY MANAGERIAL PERSONNEL

  • Sahil Barua is the Managing Director and Chief Executive Officer of the company. He has previously been associated with Bain & Company India Pvt Ltd as a Consultant.
  • Sandeep Kumar Barasia is the Executive Director and Chief Business Officer of the company. He was previously associated with Bain & Company India Pvt Ltd as a Vice-President (Partner).
  • Kapil Bharati is the Executive Director and Chief Technology Officer of the company. He has previously served as Founder and Chief Technology Officer at Athena Information Solutions Pvt Ltd and as Senior Manager of Technology at Sapient and Publicis Sapient.
  • Ajith Pai Mangalore is the Chief Operating Officer of the company. He has been associated with the company since April 6, 2013.
  • Amit Agarwal is the Chief Financial Officer of the company. He has been associated with the company since August 4, 2012.
  • Pooja Gupta is the Chief People Officer of the company. She has been associated with the company since April 1, 2021.
  • Sunil Kumar Bansal is the Vice President – of Corporate Affairs, Company Secretary and Compliance Officer of the company. He has been associated with the company since August 23, 2021.

COMPETITIVE STRENGTHS

  • Rapid growth, extensive scale and improvement in unit economics
  • The proprietary logistics operating system
  • Vast data intelligence capabilities
  • The integrated portfolio of logistics services
  • Strong relationships with a diverse customer base
  • Extensive ecosystem of partners, enabling an asset-light business model and extended reach

 KEY STRATEGIES

  • Expand investments in infrastructure and network
  • Continue to build scale in existing business lines
  • Deepen the customer relationships
  • Enhance the technology (software and hardware) capabilities
  • Expand into high-growth international markets similar to India

KEY CONCERNS

  • The company is not yet profitable.
  • The issue is overvalued compared to its peers.
  • The high growth is due to acquisitions, thus organic growth remains slower.
  • The overall industry is highly competitive

COMPARISON WITH LISTED INDUSTRY PEERS (AS OF 31STMARCH 2021)

 

Name of the Company EPS (Basic) NAV P/E Total Income (Cr) RoNW (%)
Delhivery (8.05) 54.79 *●+ 38,382.91 (14.66)
Peer Group
Blue Dart Express Ltd 42.91 249.48 150.37 32,923.60 17.08
TCI Express Ltd 26.15 112.89 66.88 8,516.40 23.12
Mahindra Logistics Ltd 4.16 79.65 119.39 32,811.90 5.05

 

FINANCIALS (RESTATED CONSOLIDATED)

Particulars (Rs. In Millions) FY 2021 FY 2020 FY 2019
Equity Share Capital 16.33 9.75 9.58
Other Equity 27,997.65 31,302.59 33,481.53
Net Worth 28,367.97 31,704.06 33,882.83
Revenue from Operations 36,465.27 27,805.75 16,538.97
EBITDA (1,370.71) (1,720.47) (1,003.79)
Loss Before Tax (4,157.43) (2,688.02) (17,833.04)
Net Loss for the year (4,155.37) (2,679.61) (17,837.63)

 

DISCLAIMER:

The information contained herein is strictly confidential and is meant solely for the information of the recipient and shall not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written permission of Swastika InvestmartLtd. (“SIL”).

The contents of this document are for information purposes only. This document is not investment advice and must not alone be taken as the basis for an investment decision. Before taking any decision to invest, the recipient of this document must read carefully the Red Herring Prospectus (“RHP”) issued to know the details of IPO and various risks and uncertainties associated with the investment in the IPO of the Company. All recipients of this document must before acting on the given information/details, make their own investigation and apply independent judgment based on their specific investment objectives and financial position.

They can also seek appropriate professional advice from their own legal and tax consultants, advisors, etc. to understand the risks and investment considerations arising from such investment. The investor should possess appropriate resources to analyze such investment and the suitability of such investment to such investor’s particular circumstances before making any decisions on the investment.

The Investor shall be solely responsible for any action taken based on this document. SIL shall not be liable for any direct or indirect losses arising from the use of the information contained in this document and accept no responsibility for statements made otherwise issued or any other source of information received by the investor and the investor would be doing so at his/her/its own risk.

The information contained in this document should not be construed as a forecast or promise or guarantee or assurance of any kind. The investors are not being offered any assurance or guaranteed or fixed returns on their investments. The users of this document must bear in mind that past performance if any, are not indicative of future results. The actual returns on investment may be materially different from the past. Investments in Securities market products and instruments included in the IPO of the Company are highly risky and they are generally not an appropriate avenue for someone with limited resources/ limited investment and low-risk tolerance. Such investments are subject to market risks including, without limitation, price, volatility and liquidity and capital risks. Therefore, the users of this document must carefully consider all the information given in the RHP including the risk factors before making any investment in the Equity Shares of the Company.

Swastika Investmart Ltd or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with the preparation of the research report.

Accordingly, neither Swastika Investmart Ltd nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

Swastika Investment Ltd may have issued other reports that are inconsistent with and reach different conclusions from the information presented in this report. The research entity has not been engaged in a market-making activity for the subject company. The research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the Subject Company or third party in connection with the Research Report.

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