SEBI approved Delhivery IPO: Facts need to know

Delhivery and its operation: Founded in 2011, Delhivery Pvt Ltd is a leading logistics and supply chain services company in India. The company has a strong nationwide network extending beyond 2825+ cities. The company is a specialist in four major categories as Shipping, Freight services, Special services, Warehousing Services, and Commerce services. Key offerings include the full suite of logistics services such as express parcel delivery, heavy goods delivery, part-truckload freight, truckload freight, warehousing, supply chain solutions, cross-border express and freight services, and supply chain software. This is an ISO-certified company.

The company claims to fulfilled over 1Billion orders to more than 19000 pin codes in India with above 80 fulfillment centers across the country. Delhivery also claims to be the largest and fastest-growing fully integrated logistics player in India by revenue as of Fiscal 2021. Delhivery also claimed to be completed one billion cumulative shipments to date in April 2021 and became 10 years old in June 2021.

Leadership team: The company is founded by Sahil Barua (Indian Institute of Management, Bangalore), Mohit Tandon (Indian Institute of Technology, Kanpur), Bhavesh Manglani (Indian Institute of Management, Calcutta), Suraj Saharan (Indian Institute of Technology, Bombay), and Kapil Bharati (Indian Institute of Technology, Delhi)

The management team consists of 11 members including people from multiple backgrounds such as technology, accounts, management, etc.; follows a highly customer-centric approach and believes in developing a long-term partnership with customers.

  • Sahil Barua (CEO)- is the managing director and founder CEO of the company since its inception in 2011. He has a strong background in consulting from reputed firms such as Bain & Company. He holds a bachelor’s degree in mechanical engineering from the National Institute of Technology, Karnataka, and a post-graduate diploma in management from IIM, Bangalore.
  • Kapil Bharati (Executive Director and CTO)- a mechanical engineer from the Indian Institute of Technology, Delhi
  • Ajith Pai the Chief Operating Officer at Delhivery. He holds an engineering degree from the National Institute of Technology, Karnataka, and PGDM from IIM Bangalore. 

Financial snapshot: Delhivery​

Major Funding Activities: Delhivery​

  • Delhivery raised $413 million in a Series F round led by SoftBank Vision Fund, Carlyle Group, and Fosun International. The value of the company raised to $1.5 billion by then and became a Unicornin 2019. 
  • FedEx India acquired a minority stake in Delhivery on a fully diluted basis along with certain minority investor rights. FedEx invested $100 million in the company.
  • In June 2021, Delhivery raised $275 million in its Series H round led by Fidelity Management and Research Company. With this round of funding, Delhivery is valued at over $3 Bn.
  • In a series round I, the company has raised $76.4 million in funding from Addition, the firm founded by the startup investor Lee Fixel.

Strategies: Delhivery​

  • Investment Activities:
    • The company is focusing on both organic and inorganic growth before going public in 2022.
    • In August 2021, Delhivery acquired Spoton Logistics – a Bengaluru-based logistic firm- to strengthen its business-to-business (B2B) vertical.
    • The company has invested approximately $30 million in Falcon Autotech. The company -head quartered in Noida, India – designs, manufactures, and maintains world class warehouse automation systems globally. The company has strong list of customers like Amazon, Flipkart, HUL, Trends to name a few.
    • This investment is in line with long term vision of Delhivery to strengthen it’s position in warehouse automated solutions areas that will help to drive greater speed, precision, and efficiency across the business lines of Delhivery.
  • Partnership and Alliance:
    • Delhivery partnered with Aramex – a UAE-based logistic company- in March 2019. This helps the company to expand its operation in the Middle East and North Africa and provides reciprocal access to Aramex customers to its India network.
    • In July 2021, the company established an alliance with FedEx, to expand its coverage in the North American and European markets.

Coming up with Initial public offering (IPO):​

  • Sebi had approved Rs7,460 crore Delhivery IPO that comprises of Rs 5, 000 crore fresh issue of equity shares and Rs2,460 crore of the offer for sale.
  • According to the RHP report, Delhivery will utilize the net proceeds from the fresh issue of Initial public offering towards funding the organic growth with the investment of Rs2,500 crore and inorganic growth of the company with an investment of Rs1250 crore. The rest amount will be used for general purposes.
  • Delhivery is planning to invest the above fund in a span of five years from the listing of the Equity Shares.
  • The company is planning to scale up its existing business lines and develop new adjacent business lines, improve network infrastructure, and upgrade its proprietary logistics operating system.
  • The company has shown its intention of inorganic growth by acquiring Spoton Logistics and investing in logistic tech companies such as Falcon.

Outlook​

  • Industry outlook:
    • India is the 6th largest economy globally and is poised to be the 3rd largest by 2030. According to the IMF report, Indian GDP is expected to grow at ~9% between 2020-25 driven by private consumption which is expected to increase from US$1.6 trillion in 2019 to US$2-2.5 trillion in 2025.
    • The Indian logistics sector is expected to grow by 9% from US$216 billion in FY 2020 to US$365 billion by FY 2026, driven by economic growth, favorable regulatory environment, improvements in transportation infrastructure.
    • Per capita logistic spend in India is ~US$280 in 2020 as against ~US$1540 in China and ~US$4860 in the US. This indicates a huge opportunity for growth in this sector in India.
    • While the logistic industry in India is fragmented with organized players accounting for approximately 3.5% in FY 2020, it is expected to reach 12.5-15.0% in FY 2026, indicating a CAGR of approximately 35% during this time where organized players will get the most benefit out of this growth.
  • Why Invest
    • The company has not yet announced the price band of its public offering. The face value of each Equity Share is ₹1.
    • Among the major competitors, Ecom Express, BlueDart, DHL logistic, Ekart logistics, FedEx logistics- are few close competitors in terms of the scale of operation in private space.
    • While the logistic industry in India is expected to go up and hence the logistic companies, it is good to keep investing in fundamentally strong logistic companies. Delhivery is a fundamentally strong company with a clear growth outlook both in terms of organic and in-organic. Our suggestion is to invest in this company for long-term benefit.

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