SUMMARY
Besides the overall rout in new-age Indian tech stocks, weak financial numbers in Q1 and subdued business update for Q2 have hit shares of Delhivery
In July, the logistics unicorn had joined the list of the top 100 companies on the BSE in terms of market capitalisation, with a market cap of over INR 50K Cr
The upcoming expiry of the lock-in period for pre-IPO investors is also weighing heavily on the shares of Delhivery, but analysts remain optimistic about the stock in the long-term
In July this year, logistics unicorn Delhivery entered the list of top 100 companies on the BSE in terms of market capitalisation, with a market cap of INR 50,711.60 Cr. It joined the likes of Mahindra & Mahindra, Adani Enterprises, and Godrej Consumer Products in the coveted list. However, within a period of three months, the startup’s market capitalisation has halved to INR 25,011.89 Cr as of October 31, 2022.
However, Delhivery is not the only Indian new-age tech stock to be under pressure. The rout in the global equities market, including India, amid the economic slowdown and the ongoing war in Europe, has hit the new-age Indian stocks, listed over the last 18 months or so, hard. But the not-so-glossy financial numbers of Delhivery for Q1 and a rather lacklustre Q2 performance update have worsened the matters for the logistics startup.
Besides, the upcoming expiry of the lock-in period for pre-IPO investors of the startup, which listed on the exchanges in May this year, on November 24 has also led to a sell-off.
Strong Start, Then Trouble
Some of Delhivery’s major pre-IPO investors such as SoftBank, Times Internet, and Carlyle Group made huge returns on their investments after the listing of the logistics startup on the Indian stock exchanges amid high market volatility.
With an IPO issue price of INR 487 per share, the shares listed at INR 493 apiece at a premium of 1.2% on the BSE. Within two months, Delhivery shares touched their record high of INR 708.4 by the end of July.
However, it faced its first major hurdle in August after the startup reported that its net loss tripled to INR 399.3 Cr in April-June quarter. Its acquisition of Bengaluru-based SpotOn Logistics had a negative impact on its partial truckload (PTL) business during the quarter.
The month of October turned out to be the most difficult one for Delhivery as its shares plunged over 40%. The startup’s subdued Q2 update, in which it said that market sentiment was muted during the July-September quarter as the festive season saw flat or reduced average user spending, citing industry reports, weighed heavily on the stock.
Delhivery shares fell over 30% in two days following the release of the Q2 business update.
It must be noted that the high inflation indeed hurt festive season sales this year. While the gross merchandise value (GMV) of ecommerce platforms during the first week of festive sales this year rose nearly 4X compared to business as usual (BAU) days, the average spending per online shopper increased only marginally, as per a RedSeer report.
Delhivery also said that its supply chain services (SCS) and truckload (TL) businesses declined in the September quarter hurt by the seasonality in its customers’ businesses.
The stock has been on a downtrend since then. After falling 7.8% last week, Delhivery shares another 3.4% on Monday to end at INR 344.35 on the BSE.
Blue Dart, one of the major competitors of Delhivery, also reported a subdued operating performance in Q2 as its costs soared in the quarter.
Like Delhivery, Blue Dart shares also fell for the last four consecutive sessions. The company’s shares plunged 4.6% on the BSE on Monday.
Analysts Still Bullish On Delhivery
Despite the selling pressure on the stock, which is expected to further increase as the lock-in expiry nears, analysts are largely bullish on Delhivery’s growth trajectory.
In a recent research note, brokerage Jefferies expressed its confidence in the startup’s ability to reverse the weak performance of its PTL business. “We believe this [PTL volume decline] should gradually reverse over the next 2-3 quarters, with the first signs in 2Q,” the brokerage said.
“Integration issues are likely to see B2B drop to 36% in FY23 before recovering back to 40% levels over the next 3-4 years. We believe our estimates have scope for upside potential if the recovery is faster,” it added.
Jefferies is also of the opinion that the National Logistics Policy will further help increase Delhivery’s volumes.
Meanwhile, Kotak Institutional Securities also upgraded Delhivery stock to ‘add’ from ‘reduce’. The brokerage said that the startup is well-placed operationally and strategically to weather near-term weakness in industry growth.
Independent market expert Manish Shah recently told Inc42 that Delhivery shares could see a bounce back after the date of lock-in passes. “Price decline of this magnitude is not sustainable as prices will revert back to the mean,” he said.
However, ICICI Securities is among the few brokerages with a negative view about Delhivery shares. With a ‘sell’ rating, the brokerage, in a recent research note, said that while the stock appears to be “much better placed” than other Indian internet players, it is expensive compared to most other global delivery and Chinese delivery players.
