Delhivery Alleges IPO-Bound Ecom Express Used Incorrect Numbers In Its DRHP

Logistics major Delhivery alleged that its rival Ecom Express used incorrect information about the former multiple times in its draft red herring prospectus (DRHP) filed with the Securities and Exchange Board of India (SEBI).

Delhivery made these allegations in an investor presentation under a section titled “Benchmarking in Peer DRHP”. While Delhivery didn’t name Ecom Express, it was clear from the numbers it provided that it was referring to Ecom Express.

As per Ecom Express’ DRHP, its shipment count stood at 514.41 Mn in the financial year 2023-24 (FY24) compared to Delhivery’s 740 Mn. However, Delhivery alleged that the shipments of Ecom Express stood at about 450 Mn when adjusted for return to origin (RTO) shipments.

The listed logistics major said while it counts forward leg (movement of goods from the manufacturer to the customer) and undelivered or RTO leg as one shipment, Ecom Express counts it as two shipments.

Considering the RTO industry average of 14-18%, Delhivery estimated that Ecom Express’ shipments stood at about 450 Mn in FY24.

“Shipment volume used in the denominator of CPS (cost per shipment) calculation is not like-to-like – peer likely double-counts RTO shipments, thereby overstating volumes and understating CPS. Peer’s CPS will increase by INR 7 (about 15%) when adjusted for shipment volumes comparable to Delhivery,” the startup alleged.

As per Ecom Express’ DRHP, its CPS reduced to INR 39.65 in FY24 from INR 45.40 in FY23 and INR 47.33 in FY22. 

Delhivery also said that ‘service EBITDA’ and ‘corporate costs’ comparisons made in Ecom Express’ DRHP are not necessarily correct due to lack of clarity on “consistent definition” of “corporate costs”.

Further, it said that CPS comparison is “problematic on several counts”. It said that per shipment metrics vary depending on shipment’s weight. Hence, Delhivery and Ecom Express’ CPS will be different due to different client mix. 

“Peer has top customer concentration of 52% of revenue (vs. 16% for Delhivery) resulting in Delhivery’s avg weight per parcel being ~2x of the peer,” it said.

Interestingly, Delhivery also pointed out its reach within the country in its investor presentation. With this, it subtly pointed out another inaccuracy in Ecom Express’ DRHP.

“Delhivery delivers pan India and covered 18,793 pin codes as of March 31, 2024. As per Government of India, there are 19,300 unique pin codes in India,” it said.

Meanwhile, Ecom Express said in its DRHP that as per MapMyIndia it serves over 27,000 pin codes covering about 97% of the population. “This extensive coverage enables Ecom Express to serve over 25,000 tier 2+ pin codes in FY 2024, positioning it uniquely to capitalise on the growing B2C ecommerce GMV from these regions,” the DRHP read.

Inc42 has reached out to Ecom Express for its comments on Delhivery’s allegations. The story will be updated on receiving a response. 

The development comes almost a month after Ecom Express filed its draft papers for up to INR 2,600 Cr IPO. The startup filed its DRHP on August 16 for an IPO which will comprise a fresh issue of INR 1,284.5 Cr and an offer for sale component of INR 1,315.5 Cr. 

Ecom Express plans to use the IPO proceeds to set up new processing centres with automation and new fulfilment machineries (estimated investment of INR 387.44 Cr), invest in IT equipment (INR 73.71 Cr), and strengthen its cloud infrastructure (INR 239.23 Cr). 

Ecom Express primarily competes with Delhivery, Bluedart, Xpressbees, Shadowfax in the B2C ecommerce express deliveries segment in India. While it mentions that Delhivery commands the most revenue in the market, it also said that it trails Blue Dart in terms of net income. 

It is heading into the public market at a time when it continues to be a loss-making entity. Its consolidated net loss stood at INR 255.8 Cr in FY24, down 67% from INR 428.1 Cr in FY23. Meanwhile, revenue from operations saw a marginal 2.15% increase to INR 2,609 Cr in FY24 from INR 2,553.9 Cr in the previous fiscal year.