Delhivery aims IPO for Q1 as market sentiment improves for large offerings

Offer is pegged to be around Rs 7,000 crore, rides on a positive outlook for sector

Logistics company Delhivery aims to launch its initial public offering (IPO) in the June 2022 quarter, said investment bankers who know about the plans.

The Gurugram-based company filed in November its draft red herring prospectus with market regulator Securities and Exchange Board of India (Sebi). It got Sebi’s approval for the IPO in January.

Challenging market conditions due to the US Federal Reserve’s hawkish pivot and Russia’s attack on Ukraine have roiled the IPO market after a record-breaking 2021.

"The market has seen an improvement in the past one week amid talks of ceasefire between Russia and Ukraine. If market conditions continue to improve, we can see large issuances such as Delhivery launch their share sale," said a banker. Four IPOs have got launched in the past one week compared to just three between January and February.

Delhivery IPO is pegged to be around Rs 7,000 crore. It is India’s largest multimodal, fully-integrated logistics and supply-chain firm by revenues (FY21 basis).

Brokerage Motilal Oswal said in in a recent note the domestic logistics sector offers a large addressable opportunity as it is pegged to grow at an annualized rate of 9 per cent to $365 billion between FY20 and FY26. It expects the growth to be higher for the organised players due to their “relentless focus on technology and automation.”

At present, the logistics market is highly fragmented with organized players accounting for less than 4 per cent of market share. Motilal Oswal said the shift to unorganised to organized sector is already underway.

“This shift has gathered pace with the rollout of GST, which increased demand for national, integrated supply chain service providers with integrated warehousing and Transportation models, that allow customers to scale operations at lower fixed costs, while creating opportunities for optimizing footprints and capacity utilization, lesser inventory, and faster and cheaper fulfillment,” said Alok Deora and Dhirendra Patro, who are analysts at Motilal Oswal, in a note.

As per the brokerage, some of the key positives of Delhivery are an asset-light business model, diverse customer base, and sophisticated network infrastructure.

Motilal Oswal said Delhivery has proprietary technology systems that enable it to offer integrated logistics services to a wide variety of customers. Its technology stack consists of over 80 applications that encompass all supply chain processes.