Delivery IPO: Valuation, Strengths and Weaknesses – Things to Know Before Applying for an IPO
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The Rs 5,235 crore IPO of Gurgaon-based logistics company Delhivery opened for subscription on Wednesday 11 May and closes on Friday 13 May. The price range of the offering is between Rs 462 and Rs 487 at a par value of Rs 1 per share .
Investors can bid for a minimum of 30 shares with an associated investment of Rs.14,610 per lot and a maximum of 13 lots of 30 shares for Rs.1,89,930 at the upper band price of Rs.487.
The grant date for successful bidders is May 19 and the possible listing date for Delivery shares is May 24.
The offering comprises a new issue of Rs 4,000 crore and an offer to sell (OFS) of up to Rs 1,235 crore from existing shareholders and promoters. Under OFS, existing investors like Carlyle Group and SoftBank are likely to exit. Delhivery is one of the largest and fastest growing fully integrated logistics service providers in India. The company has a reach of 17,488 PIN codes and has 14.2 million square feet of infrastructure with more than 3,836 delivery points. It provides five types of transportation services: express parcel services, part-truckload services, truckload services, supply chain services, and cross-border services. Express parcel services contribute more than 62% of revenue in fiscal 2021, and less-than-truckload services contribute 11.5%. The company has a total of 23,113 customers, most of which include e-commerce marketplaces and so on.
Delivery IPO: Vulnerabilities
The company is vulnerable to a potential slowdown in India’s e-commerce business, as 62% of its revenue in fiscal 2021 came from express parcel services.
Another weakness is the company’s reliance on its top 5 customers, which contribute 41% of the company’s revenue.
Also, the company recently launched a C2C shipping service, but it can be difficult to gain market share in this segment due to competition.
Delivery IPO: Valuation & Outlook
AngelOne, which has a neutral rating on the IPO in a previous release, said that based on annualized FY22 numbers, the IPO rates at 4.8x EV/sales and 5.2x price-to-book in the upper price range of the IPO will . For 9MFY22 the company has reported an EBITDA loss of Rs 232 crores and a net loss of Rs 891 crores. In the Indian markets, no other peer group has the same business model as Delhivery. The company has reported good revenue growth of 82% in 9MFY2022 and the company is expected to achieve positive EBITDA by the end of fiscal 2022.
It should be noted that out of 25 broker reports reviewed by ET Now Digital, only 2 had a Subscribe rating, 3 remained Neutral, while 22 suggested investors avoid them.
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