Delhivery
is a fully integrated logistics player in India providing a full range of
logistics services, including express parcel and heavy goods delivery, part truckload
freight (“PTL”), truckload freight (“TL”), warehousing, supply chain solutions,
cross border express and freight services. Apart from this it also offers supply
chain software and value-added services, such as e-commerce return services,
payment collection and processing, installation and assembly services and fraud
detection.
The
business model of the company is asset light, wherein it extends its logistics
ecosystem by enabling network partners, such as franchisees, retail partners
and delivery agents, to on board their physical assets and resources and
participate in its platform.
Its
in-house logistics technology stack is built to meet the dynamic needs of
modern supply chains and have over 80 applications through which the company
provide various services, orchestrated by its platform to govern transaction
flows from end to end. The platform of the company is designed as a set of
foundational layers, libraries and APIs that form the building blocks for
logistics applications and provides a configurable framework and tools to
enable both internal and external developers to build custom applications.
End
of December 2021, it had built a nation-wide network with presence in every
state, servicing 17488 PIN codes (covering 90.61% of total 19300 Pin codes in
India). To further build scale in its
PTL freight services business, it has acquired Spoton Logistics (“Spoton”), an
express PTL freight service provider in India, in August 2021. Spoton has a
network presence across 13087 PIN codes with 2.85 million sq. ft. of
infrastructure as of December 31, 2021.
As
of December 31, 2021, its network infrastructure included 122 gateways
(including Spoton’s 40), 21 automated sort centres, 93 fulfilment centers, 35
collection points, 31 returns processing centers, 244 service centres
(including Spoton’s 138), 132 intermediate processing centers and 2,521 direct
delivery centres.
Together
with Spoton, it operated 4,179 delivery points, as of December 31, 2021. Its
self-delivery network is augmented by 1,209 partner locations that expand its
reach, provide critical flexible capacity and redundancy and Spoton’s service
centres are augmented by 205 additional locations operated by business
associates.
It
has expanded internationally by establishing a reciprocal partnership with Aramex
and a strategic alliance with FedEx, both global express leaders, for customs
clearance, pick-up, and delivery services. It entered an alliance with Aramex
in March 2019, expanding its coverage in the Middle East and North Africa, and
providing reciprocal access to Aramex customers to its India network.
Further
in July 2021, the company have executed an agreement to facilitate a strategic
alliance with FedEx, targeted principally at expanding its coverage in the
North American, European, Australian, and Asian markets. This agreement became
effective on December 5, 2021.
Issue and objects of the offer
The
Initial Public Offer comprises a Fresh Issue of Equity Shares aggregating up to
Rs 4000 crore and offer for sale (OFS) aggregating up to Rs 1235 crore by the
selling shareholders.
The
OFS comprise selling of shares by both Institutional as well as Individual with
former selling shares worth Rs 1184 crore [CA Swift Investments Rs 454 crore,
Deli CMF Rs 200 crore, SVF Doorbell (Cayman) Rs 365 crore and Times Internet Rs
165 crore] and latter worth Rs 51 crore [Kapil Bharati Rs 5 crore, Mohit Tandon
Rs 40 crore and Suraj Saharan Rs 6 crore].
On
post issue expanded equity (on Upper price band), the holding of selling
shareholders will be 5.08% for CA Swift Investments, 0.38% for Deli CMF, 18.51%
for SVF Doorbell (Cayman), 3.91% for Times Internet, 0.91% for Kapil Bharati,
1.50% each for Mohit Tandon and Suraj Saharan.
Of
the total proceeds from fresh issue (net of issue costs), about Rs 2000 crore
will be utilised to fund organic growth initiatives [Rs 160 crore for building
scale in existing business lines and developing new adjacent business line; Rs
1360 crore towards expanding its network infrastructure; Rs 480 crore towards
upgrading and improving its proprietary logistics operation system]; Rs 1000
crore to fund inorganic growth through acquisitions and other strategic
initiatives and balance towards general corporate purposes.
Strengths
Offering
a full range of logistics services, including express parcel delivery, heavy
goods delivery, PTL freight, TL 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 enable it to capture higher wallet share with existing clients. It also helps to retain clients as well allow
the company to offer competitive price to customers. Several of customers of the company use more
than one of its service offerings. About 58.13% of revenue in 9mFY22 come from
customers who had used at least two of the services of the company.
It
is the largest and fastest growing fully integrated logistics service player in
India by revenue with a CAGR of 48% during FY19-FY21.
The
proprietary technology systems built by a large in-house team enables it to
offer integrated logistics services to a wide variety of customers while
remaining asset-light and ensuring service quality and efficiency.
Its
technology stack orchestrates its network infrastructure and consists of more
than 80 applications that encompass all supply chain processes including order
management, warehouse management, transportation management, financial
transactions such as billing and remittance, tracking and supply chain
analytics.
Active
customer base of the company numbering at 23113 (excluding that of Spoton) is
diverse and spread across e-commerce marketplaces, direct-to-consumer e-tailers
and enterprises and SMEs across several verticals such as FMCG, consumer
durables, consumer electronics, lifestyle, retail, automotive and
manufacturing, for the nine months period ended December 31, 2021. The customer
base includes most of the key e-commerce players in India and over 750 D2C
brands end of December 2021. In addition, Spoton offers PTL freight services to
5,533 Active Customers across industry verticals.
The
Express Parcel Service of the company largely caters to customers in growing
e-commerce industry in the country. Despite the company consciously diversified
into other industry verticals, including customer electronics, consumer
durables, FMCG, healthcare, lifestyle, automobiles and manufacturing the
e-commerce customers (as reflected by Express Parcel Services) continue to
command 61.51% of revenue in 9m FY2022, down from about 83.02% in FY19.
Following
its acquisition of Spoton, the company has become the third largest PTL freight
player in India in terms of revenue as of FY2021, with a market share of
approximately 8.3% of the organized PTL market in India.
It
has built a high-quality logistics infrastructure and network engineering, a
vast network of domestic and global partners and significant investments in
automation, all of which are orchestrated by its self-developed logistics
operating system that is guided in real-time by deep sources of proprietary
network and environmental data.
Together,
these create powerful, intersecting flywheels that drive strong network
synergies within and across its services and enhance its value proposition to
customers.
Weakness
Continued
loss at operating level after excluding the non-cash fair value losses
accounted in FY2019, FY2021 and 9mFY2022.
Considering history of losses and negative operating cash flow it needs
to be seen how it manage to sustain growth as well as turn profitable.
Logistics
industry (especially components of it such as road transportation, warehousing)
is a highly fragmented industry with presence of small fleet owners and thus
characterised by intense competition.
All
logistics facilities are leased as the company operate an asset light model.
And, thus, failure to renew leases or locate desirable alternative to current
facilities or any irregularities in lease agreement may adversely affect the
business of the company.
However,
its Retention Rate of material network partners, fleet partners and manpower
agencies with an annual billing of more than Rs 50 lakhs was 95.45%, 97.06% and
94.92% for FY 2019, FY 2020, and FY 2021, respectively.
Significant
portion of its business is accounted by top five customers of the company. Top
five customers accounted for 43.98%, 42.66% and 48.78% in 9mFY2022, FY2021 and
FY2019, respectively. So, any loss of large client or weak performance of that
client will impact the business performance of the company.
Failure
to successfully integrate acquisitions or achieve the anticipated benefits from
these alliances or acquisitions or investments may impact the performance of
the company. The company plans to offer
financial services such as working capital financing, insurance, and personal
loans in the future, either independently or in association with its partners
leveraging its data analytics capability.
It
also expanded into high-growth international markets same as India. Thus,
venturing into unfamiliar domains or geography increases business risk.
Considering
high reliance on e-commerce industry or certain Indian online marketplaces, any
market share loss of these online marketplaces will have impact on the
performance of the company. Major
e-commerce marketplaces are estimated to have fulfilled more than 75% of their
parcel deliveries through their in-house captive logistics arms in FY 2021 and
59% of total e-commerce shipments in India in FY 2021 were handled by captive
logistics arms of the various e-commerce companies.
Thus, any effort by the company’s e-commerce
marketplace to reduce outsourcing logistics operations or to develop their
in-house fulfilment capabilities to serve their logistics needs may
significantly affect its market share and total parcel volume.
The
audit report on the Special Purpose Consolidated Financial Statements of Spoton
as of and for the fiscal year ended March 31, 2021, have included an Emphasis
of Matter by BSR & associates LLP, the predecessor statutory auditors of
Spoton, drawing attention to the Scheme of Arrangement for amalgamation of
Vankatesh Pharma Private Limited and Spoton. In accordance with the Scheme,
which was approved by the NCLT, Ahmedabad, vide its order dated November 27,
2019, Spoton continue to amortize goodwill over a period of five years in such
financial statements, which overrides the relevant requirement of Ind AS 103
Business Combination and Ind AS 36 Impairment of Assets, which state that
acquired goodwill is not permitted to be amortized and is required to be tested
annually for impairment.
Additionally,
the Statutory Auditors of the company also included an Emphasis of Matter in
their examination report on the Restated Financial Statements indicating that
their audit report on the Audited Interim Consolidated Ind AS Financial
Statements included an emphasis of matter related to Spoton, to state that, in
accordance with the Scheme approved by the NCLT, Spoton continues to amortise
Goodwill over a period of five years, which overrides the relevant requirement
of Ind AS.
Has
not complied with certain provisions of the Companies Act, 2013, and have had a
delay in reporting a downstream investment in the past.
Valuation
Consolidated
revenue for the fiscal ended March 2022 was up 31% to Rs 3646.53 crore. But
with operating profit margin being negative 3.1% compared to negative 6.2% in
corresponding previous period, the operating loss was lower by 34% to Rs 113.74
crore. The PBT was a loss of Rs 365.22 crore against a loss of Rs 268.80 crore.
With fair value loss on financial liabilities being Rs 9.195 crore against nil,
the PBT before EO was a loss of Rs 374.41 crore, an increase of 39%. EO Expense
was Rs 41.33 crore against nil. Thus,
the PBT after EO was a loss of Rs 415.74 crore against a loss of Rs 268.80
crore in corresponding previous period. Eventually the net loss was Rs 415.74
crore against a loss of Rs 268.93 crore in the corresponding previous period.
For
nine months ended December 2021, the sales were up 82% to Rs 4810.53 crore. As
9mFY2022 include the financials of newly acquired Spoton (consummated in Aug
2021) for part of the period both periods are not comparable. But with OPM
negative 4.9% against negative 3.8%, it was a loss of Rs 235.48 crore at
operating level. The PBT was a loss of Rs 599.01 crore against a loss of Rs
256.16 crore.
After
accounting for fair value loss on financial liabilities of Rs 299.74 crore, PBT
before EO was a loss of Rs 898.75 crore against a loss of Rs 256.16 crore. EO
was nil for the period against an expense of Rs 41.33 crore. Thus, PBT after EO
was a loss of RS 898.75 crore, an increase of 55%. Eventually the net profit
was a loss of Rs 891.14 crore against a loss of Rs 297.49 crore.
TTM
sales of the company were Rs 5813.19 crore, and the net loss was Rs 1009.39
crore. However, more established logistics players such as Transport
Corporation of India (TCI), TCI express and VRL Logistics quotes at a TTM PE of
19.1 times, 48.3 times and 33.8 times respectively. Blue Dart Express and
Mahindra Logistics quotes at a PE of 39.2 times and 90.6 times.
The offer at upper
price band is made at 6.1 times of its EV/sales. On TTM basis, TCI Express, VRL
Logistics and TCI was available at an EV/Sales of 6.1 times, 2.1 times and 1.7
times respectively. Blue Dart Express quotes at EV/Sales of 3.6 times of its FY
2022 sales. Mahindra Logistics quotes at an EV/Sales of 0.8 times of its FY2022
sales.
As there are no promoters for the company, the entire equity will
be floating stock after the mandatory IPO related lock in of one year.
Delhivery: Issue Highlights
|
|
Sector
|
Logistics
|
Fresh Issue (in Rs. Crore)
|
4000.00
|
Offer for sale (in Rs. Crore)
|
1235.00
|
Price band (Rs.)*
|
|
Upper
|
487
|
Lower
|
462
|
Post-issue equity (Rs crore)
|
|
Upper
|
72.45
|
Lower
|
72.89
|
Post-issue promoter (including promoter group) stake (%)
|
0.00
|
Minimum Bid (in nos.)
|
30
|
Issue Open Date
|
11-05-2022
|
Issue Close Date
|
13-05-2022
|
Listing
|
BSE, NSE
|
Rating
|
39 /100
|
Delhivery: Consolidated Financials
|
|
1903 (12)
|
2003 (12)
|
2103 (12)
|
2012 (9)
|
2112 (9)
|
Sales
|
1653.90
|
2780.58
|
3646.53
|
2643.87
|
4810.53
|
OPM (%)
|
-8.3
|
-6.2
|
-3.1
|
-3.8
|
-4.9
|
OP
|
-137.80
|
-172.05
|
-113.74
|
-100.31
|
-235.48
|
Other income
|
40.98
|
208.05
|
191.76
|
162.66
|
100.88
|
PBIDT
|
-96.82
|
36.01
|
78.03
|
62.36
|
-134.60
|
Interest
|
35.81
|
49.22
|
88.63
|
63.94
|
76.23
|
PBDT
|
-132.64
|
-13.21
|
-10.60
|
-1.58
|
-210.83
|
Depreciation
|
170.01
|
255.59
|
354.62
|
254.58
|
388.18
|
PBT
|
-302.64
|
-268.80
|
-365.22
|
-256.16
|
-599.01
|
Fair value loss on financial liabilities
|
1480.664
|
0
|
9.195
|
0
|
299.739
|
PBT before EO
|
-1783.30
|
-268.80
|
-374.41
|
-256.16
|
-898.75
|
EO Exp
|
0.00
|
0.00
|
41.33
|
41.33
|
0.00
|
PBT after EO
|
-1783.30
|
-268.80
|
-415.74
|
-297.49
|
-898.75
|
Tax
|
0.00
|
0.12
|
0.00
|
0.00
|
-7.61
|
PAT
|
-1783.30
|
-268.93
|
-415.74
|
-297.49
|
-891.14
|
Share of profit from Associates (SoPA)
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
Minority Interest
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
Net profit
|
-1783.30
|
-268.93
|
-415.74
|
-297.49
|
-891.14
|
EPS (Rs)**
|
-24.6
|
-3.7
|
-5.2
|
-3.5
|
-12.3
|
** on post issue equity (on upper price band) of Rs 72.45 crore. Face
Value: Rs 1
|
|
|
EPS is calculated after excluding EO and relevant tax
|
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# EPS can not be annualised due to seasonality in operations
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Figures
in Rs crore
|
|
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Source:
Capitaline Corporate database
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