Delhivery Shares Tank 30% In Two Days On Subdued Q2 Business Update

Shares of Delhivery continued the two-day losing streak and slumped as much as about 20% on Friday (October 21) to touch its record low at INR 377.05 on the BSE after the logistics startup reported muted Q2 performance on Wednesday.

Overall, the startup’s shares fell over 30% in the last two days. The shares are currently trading over 22% below their IPO issue price of INR 487 per share.

In its business update for Q2 FY23, Delhivery said that the market sentiment remained broadly unchanged from Q1 and consumer discretionary spending was muted due to continuing inflationary pressure and due to flat or lower average user spending and total active shoppers during the festive season.

The express parcel volume segment picked up towards the end of the September quarter due to festive demand, and service line volumes for the segment grew in high teens over a large base of the corresponding quarter in previous year, Delhivery said.

However, it warned of moderate growth in shipment volumes in the last two quarters of FY23. “While the festive season sale surge in shipment volumes will spill over to Q3FY22 as well, we anticipate moderate growth in shipment volumes through the rest of the financial year,” it said.

Besides, the startup said that its part truckload (PTL) business, which faced operational challenges in Q1 due to the integration of Delhivery and SpotOn networks, was “on a path to recovery”, while the volumes in its supply chain services (SCS) and truckload (TL) businesses declined in Q2, affected by the seasonality in its customers’ businesses. 

“Going forward we remain watchful of the market sentiments. As inflationary pressures and service disruptions due to monsoon ease across the country we expect improvement in volumes, revenue and service margins going forward,” Delhivery said in the statement.

Earlier this week, ICICI Securities cut its price target (PT) on Delhivery stock to INR 477 from INR 484 earlier, which implies almost a 26% upside to the stock’s current price of INR 378.6. The brokerage also maintained a ‘sell’ rating on the stock.

Meanwhile, international brokerage Jefferies, in a research note earlier this week, pointed out that Delhivery’s volume decline in PTL in Q1 led to a 13% stock price correction. However, the brokerage believes that this issue would gradually reverse over the next 2-3 quarters, with the first signs in Q2.

“B2B was 42% of Delhivery’s FY22 revenues, with nearly half of it from PTL. Integration issues are likely to see B2B drop to 36% in FY23 before recovering back to 40% levels over the next 3-4 years,” Jefferies said.

With a more positive outlook on the startup’s growth trajectory, Jefferies has a ‘buy’ rating on the stock with a PT of INR 775, which implies over a 100% upside to the stock’s current trading price.

Delhivery made its debut in the Indian stock market in May this year. At the current level, the shares are trading 21% lower from the debut price on the BSE.

Besides Delhivery, shares of new-age tech startups Nykaa and Policybazaar also touched their record low levels this week.