Delhivery IPO: All You Need To Know
Delhivery IPO will open on May 11 and close on May 13.
Delhivery Ltd., a fully integrated logistics services provider, will sell shares at Rs 462-487 apiece in its three-day initial public offering starting Wednesday.
The Gurugram-based supply-chain solutions provider is seeking to raise up to Rs 5,235 crore from the IPO, according to its red herring prospectus. It comprises a fresh issue of shares worth Rs 4,000 crore and an offer-for-sale of Rs 1,235 crore.
Selling shareholders in the IPO include funds owned by the Carlyle Group, Softbank, Times Internet Ltd. and China Momentum Fund. Co-Founders Suraj Saharan, Kapil Bharati and Mohit Tandon are also offloading shares.
Issue Details
Opens on: May 11.
Closes on: May 13.
Size: Rs 5,235 crore.
Price band: Rs 462-487 apiece.
Face value: Re 1 apiece.
Lot size: 30 equity shares and multiples.
Listing on: BSE and NSE.
Lead Managers: Kotak Mahindra Capital, Morgan Stanley India, BofA Securities and Citi Group.
Use Of Proceeds
The company, according to the IPO prospectus, plans to use the proceeds from the fresh issue to fund development of existing delivery lines, acquisitions and other strategic initiatives.
The remaining Rs 1,000 crore will be used for general corporate purposes.
Delhivery mega-gateway facility at Tauru, Haryana. (Source: Rishabh Bhatnagar/BQ Prime)
Business
Delhivery claims to be India’s largest and fastest-growing fully integrated logistics services provider by revenue as of FY21.
The company aims to build the “operating system for commerce”, and provided supply-chain solutions to 23,113 active customers such as e-commerce marketplaces, direct-to-consumer e-tailers and enterprises and SMEs across several verticals, including FMCG, consumer durables, consumer electronics, lifestyle, retail, automotive and manufacturing as of December.
It provides a full range of logistics services such as express parcel delivery, heavy goods delivery, partial truckload freight, truckload freight, warehousing, supply-chain solutions, cross-border express and freight services and supply-chain software, along with value-added services such as e-commerce return services, payment collection and processing, installation and assembly services and fraud detection.
All these, it said, are tech-enabled and are run using its in-house logistics technology stack via 80 applications. Through its network, the company said it serviced 17,488 PIN codes in India, as on Dec. 31, 2021.
Besides the apps, it operates 21 fully and semi-automated sortation centres and 82 gateways across the country.
Delhivery mega-gateway facility at Tauru, Haryana. (Source: Rishabh Bhatnagar/BQ Prime)
The Indian logistics sector, according to the prospectus, is one of the largest in the world and is expected to grow to $365 billion (about Rs 28.1 lakh crore) by FY26 at a CAGR of 9%. Organised players such as Delhivery make up only 3.5% of the market share.
Financials
Delhivery is yet to post profits. Its revenue from contracts, however, has grown over the last four fiscals.
Peers
Delhivery’s listed peers will include Blue Dart Express Ltd., Mahindra Logistics Ltd. and TCI Express Ltd. in the logistics sector.
According to Delhivery, its tech-enabled services and full-stack offering differentiates it from other listed logistics companies whose businesses may be considered to be similar to some of its service offerings.
Risks
Ongoing Covid-19 pandemic and measures intended to prevent its spread have had, and may continue to have, a material and adverse effect on business.
Delhivery has a history of losses and negative cash flows from operating, investing and financing activities and they may continue given the investments expected to be made to grow the business and logistics infrastructure.
Delhivery relies on a scaled, automated and unified network infrastructure for business operations and it may not be able to manage growth if the network isn’t maintained or expanded.
Disruptions to logistics and transportation facilities could have a material adverse effect on business.
Funding requirements and the proposed deployment of net proceeds have not been appraised by any bank or financial institution or any other independent agency and the management will deploy the net proceeds as per its operational and business requirements.
Labour unrest, labour union activities, increases in the cost of labour or failure to comply with applicable labour laws could negatively affect business.
Reliance on network partners and other third parties for certain aspects of the business poses additional risks.
Shipments handled and transported through our network and risks associated with transportation and cash-on-delivery may not be fully covered by our insurance policies.
Long-term growth and competitiveness are highly dependent on its ability to control costs and pass on any increase in operating expenses to customers.
Certain contingent liabilities which, if materialise, may affect results of operations, financial condition and cash flows.
E-commerce customers contribute a majority of its shipment volume and Delhivery’s growth is highly correlated with the growth of the e-commerce industry which is dependent on the growth of broadband and mobile internet penetration and usage, consumer comfort with online shopping, among others.
A significant portion of its business is attributable to certain large customers. Their future actions may have an adverse impact on business.
Delhivery operates in a highly fragmented industry and faces intense competition.
Delays or defaults in payment by customers or the tightening of payment periods to suppliers could affect cash flows.
All logistics facilities are leased and some lease agreements may have certain irregularities.
Failure to protect customers’ data through improper handling or unauthorised access could damage reputation and substantially harm business.
Economic sanctions, anti-corruption laws and anti-money laundering laws imposed by the U.S. and other jurisdictions may expose Delhivery to potential compliance risks.
Deficiencies in India’s road network and telecommunication, internet, air cargo and airport infrastructures could impair the functioning of business operations and technology systems.
Changes in the taxation system, foreign investment laws in India could adversely affect business.