Delhivery files for ₹7,400-crore IPO; will it deliver in the stock market?

It’s raining start-up maiden issues, and the latest on the bandwagon is logistics unicorn Delhivery. The Gurugram-based company has filed for an initial public offering (IPO) with stock market regulator Securities and Exchange Board of India (SEBI) to raise about ₹7,400 crore.

As of March 2021, Delhivery was India’s largest and fastest growing integrated logistics services by revenue, indicated a RedSeer report.  The capital market success of its start-up peers in the online space — such as Zomato, Nykaa and PolicyBazaar — indicates that the Delhivery IPO is also poised to be lapped up by investors.

The Delhivery IPO, for which dates are yet to be announced, will consist of a fresh issue of shares worth ₹5,000 crore. Also, existing investors and promoters are selling shares worth ₹2,460 crore in an offer-for-sale (OFS). Investors participating in the OFS include China Momentum Fund, Carlyle Group, Softbank and Times Internet. Investment bankers Kotak Mahindra Capital, Morgan Stanley India, BOFA Securities and Citigroup are the bookrunning lead managers for the issue.

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The start-up got valued at over $1 billion, turning unicorn, after raising $413 million from SoftBank Group and other investors in 2019. It has reaped the dividend of the e-commerce boom in India, as indicated by its star investors.

What does Delhivery do?

The 10-year-old company offers logistics and supply chain services predominantly to e-commerce firms. Its key customers are e-tailers (both direct-to-consumer, or D2C, and business-to-business, or B2B), as well as small and medium enterprise (SMEs) operating in the segments of FMCG, consumer durables, consumer electronics, retail and manufacturing.

The start-up has 20 fully- and semi-automated sortation centres and 86 gateways across India, according to the draft red herring prospectus (DRHP) filed with SEBI. It had a rated automated sort capacity of 3.98 million shipments per day as of September 30, 2021.  Further, it has automated material handling systems at gateways in Bengaluru, apart from Tauru in Haryana, and Bhiwandi in Maharashtra.

Delhivery claims to have fulfilled over 850 million orders till date, working with more than 10,000 customers. Its rivals include global logistics companies that are betting big on the e-commerce space, such as DHL’s Blue Dart Express and DTDC India. The sector is a critical one, estimated to contribute around 14% of India’s GDP.

Prepping for the IPO

Ahead of filing papers with SEBI, Delhivery began to prepare for a public listing. Supposedly to meet regulatory requirements, its co-founders Mohit Tandon and Bhavesh Manglani stepped out of the company. Tandon and Manglani had founded the company in 2011 along with Sahil Barua, Kapil Bharati and Suraj Saharan.

Last month, Delhivery converted itself from a private limited entity to a public limited entity, as the former cannot list on a stock exchange.  Prior to that, it issued bonus shares to all its 90 shareholders, in the ratio of 9:1 (nine bonus share for every equity share held in the company).

In August 2021, it acquired Bengaluru-based Spoton Logistics. The move was seen to bolster its B2B capabilities.