Delhivery Shares Tank Over 15% On Weak Q2 Performance Update

Listed logistics startup Delhivery issued a Q2 FY23 performance update before releasing detailed financials for the quarter, the startup’s regulatory filings show.

The startup reported a muted market sentiment in Q2 2022, stating that the festive season saw flat or reduced average user spending. It added that it saw a decline in certain business categories as well.

“Consumer discretionary spending remained muted due to continuing high levels of inflation, with average user spends and total active shoppers remaining flat or lower during the ongoing festive season, as per the industry reports,” the update said.

The startup’s update has created sell-off pressure and the startup’s shares are down by as much as 14% during Thursday’s (October 20) intraday trading.

As of 3:15 PM IST on Thursday, the logistics startup’s shares were trading at INR 470.50 apiece, down 15.73% from the previous close of INR 558.35.

Without providing detailed numbers, the logistics startup said that the express parcel volumes remained stable in Q2, increasing towards the end of the quarter.

Delhivery noted that the trend was primarily driven by the festive season sales, especially in the heavy goods category (such as appliances).

Delhivery added that the volumes in its supply chain services and truckload businesses declined in Q2FY23 as compared to the previous quarters. The startup put down the decline as the expected effects of the seasonality of its customers’ businesses.

The logistics startup also noted that in the part truckload (PTL) category, it faced operational challenges as it integrated SpotOn’s network with its own. “However, the business is on a path to recovery and we recorded high teens growth in freight tonnage handled on a QoQ basis,” Delhivery added.

Incidentally, Delhivery acquired SpotOn in August last year for as much as $200 Mn.

The performance update also stated that Delhivery has made enough capacity investments in FY22 and early FY23 to sustain its current growth.

“As inflationary pressures and service disruptions due to monsoon ease across the country we expect improvement in volumes, revenue and service margins going forward,” the startup added.

Interestingly, in a note last month, Kotak Institutional Equities Research said that Delhivery was well-placed to outperform the industry in the long term. However, Kotak placed a ‘reduce’ rating on Delhivery’s shares, giving it a fair value of INR 540.

The brokerage firm’s analysts expect Delhivery to record an EBITDA compound annual growth rate (CAGR) of 26% over the FY25-FY35 period.