[What The Financials] SoftBank-Backed Delhivery Burns 96% More Cash With Marginal Revenue Growth

India’s ecommerce story has flourished with billions of dollars being invested in the market only on the back of the logistics industry, without which online shoppers would not get orders in a jiffy. As a result with the ecommerce giants, the logistics sector has seen some unicorns as well such as Delhivery, Rivigo and BlackBuck.

According to Inc42’s State of The Indian Startup Ecosystem 2018 Report, India had over 900 logistics startups as of November 2018. DataLabs by Inc42 notes that in H1 2019, logistics startups raised $567.8 Mn in nine deals.

While BlackBuck and Rivigo etc have been trying to solve larger issues of India’s fragmented logistics and transport industry, Delhivery has found a different use-case targetting the booming ecommerce industry itself.

Delhivery was founded in 2011 by Mohit Tandon, Sahil Barua, Bhavesh Manglani, Kapil Bharati, and Suraj Saharan and provides a full suite of logistics services such as express parcel transportation, LTL and FTL freight, reverse logistics, cross-border, B2B & B2C warehousing and technology services. The company claims to cater to 17,500 pin-codes and 2,000 cities.

The company has raised $748.6 Mn from marquee investors and joined the unicorn club earlier this year with investment from SoftBank. However, Delhivery continues to be a loss-making portfolio company of SoftBank group, which is known for its risk-taking investments.

According to its financial filings, Delhivery on a consolidated level reported a loss of INR 1772.77 Cr, with a revenue of INR 1694.15 Cr and expenses of INR 3466.92 Cr. To further understand how the company is sustaining its growth with major losses we analysed the company’s detailed filings.

Delhivery: Identifying Sources Of Revenue

The company claims to have fulfilled over 500 Mn transactions and says it works with over 10K direct customers, which includes large and small ecommerce participants, SMEs and over 350 leading enterprises and brands.

Delhivery follows the distributed model and ecommerce methods offering business-to-business (B2B) services where every branch can operate as a hub.The company recognises revenue to “depict the transfer of control of promised goods or services to customers upon the satisfaction of performance obligation under the contract in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.”

It says that the “consideration includes goods or services contributed by the customer, as non-cash consideration, over which company has control.” Further, the revenue in excess of billings is recognised as unbilled revenue in the balance sheet. Essentially, billings are in excess of revenue recognised, the excess is reported as unearned and deferred revenue in the balance sheet.

To this note, we noticed that while the company’s standalone operational revenue is INR 1653.83 Cr, on a consolidated level, the company’s operational income is INR 1653.9 Cr.

Delhivery Expenses: Growth Without Advertising/Marketing?

On expanding into the company’s expenses for FY19, we noted that on a standalone and consolidated level, employee benefits make up to 10.2% and 20.2%, respectively, of the total expenses. The company’s employee benefit expenses grew to INR 355.37 Cr on a standalone basis and INR 359.06 Cr on a consolidated level.

On a standalone basis, the company’s major expenses included depreciation, power and fuel, insurance, training and recruitment, etc. Further, the company’s vehicle running expenses were INR 269.21 Cr, which was 59.8% increase on a Y-o-Y basis. It also spent INR 29 Cr on secondary packaging and INR 13.74 Cr on repairs and maintenance.

On a consolidated level, it spent on power and fuel, insurance, training and recruitment, vehicle running expenses, secondary packaging, etc. However, notably, the company’s biggest expense was “miscellaneous”. There are no descriptions available on these miscellaneous expenses of INR 2336.5 Cr and INR 2307.7 Cr on a consolidated and standalone basis, respectively.

Further, the company hasn’t detailed any expenses on advertising, marketing or promotional activities. Therefore, it is to be wondered how much of this miscellaneous expense is on such marketing? Or has the company sustained growth without spending on marketing?

We reached out to Delhivery to understand how much it has specifically spent on marketing and the company’s thoughts on the performance. With SoftBank sneaking in when the company was planning for a public listing, there will be a lot of pressure to prove profitability in the long run. Delhivery still has to generate enough revenue to justify its cash burn for growth.

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