Delhivery posts Rs 120 crore loss in Q4; should you sell or hold the stock?

Recently listed logistic-giant Delhivery posted a Rs 119.68 crore loss for the fourth quarter of financial year 2021-22 (Q4FY22). This was slightly higher than the loss of Rs 118 crore Delhivery reported in the same period of the last fiscal. 

On the upside, its revenues for the recent quarter doubled from the previous year to Rs 2,072 crore, as against Rs 1,003 crore in Q4FY21. 

For the full financial year ended 2022, the logistic tech company’s net loss swelled to Rs 1,011 crore, compared to Rs 415.7 crore in the previous year. Its revenue, meanwhile, rose 89 per cent to Rs 6,882 crore for the year.

Following the company’s first financial results after its listing, its stock rose over 3 per cent in a weak market on Tuesday, but soon fizzled out amd turned flat. 

On their part, analysts remain watchful given that the firm is yet to turn profitable. 

"Delhivery, like some of the other new-age companies, is still making a loss. Given this and how the markets are playing out currently, I do not suggest investors buy Delhivery stock at these levels. Revenue visibility, growth and stability in a company's operational and financial performance are the three key factors investors must keep in mind before investing in any stock," said A K Prabhakar, head of research at IDBI Capital.

Investors should avoid stocks, which do not consistently make profits, since odd or one-time losses are still acceptable, he said, adding that it remains difficult to predict when these new-age companies will turn profitable. 

Even after a strong growth in topline, company’s net loss has widened mainly due to increase in other expenses and depreciation. At this juncture, investors should avoid fresh entry in the scrip until there is improvement in the company’s bottom line, said Mohit Nigam, Head- PMS, Hem Securities.

For FY22, Delhivery said it posted an operating profitability with an adjusted EBITDA of Rs 72 crore and adjusted cash profit after Tax (APAT) of Rs 212 crore. 

This was due to the operating leverage effect, and was in line with the management’s strategy of turning profitable after scaling up. However, despite the cash profits, the cash flows from operations have seen a significant decline, said Parth Nyati, founder, Tradingo.

“The frequent use of adjusted EBITDA and adjusted cash profits makes it difficult to comment on the actual profitability. We suggest investors wait for a few quarters to analyse how the business evolves in terms of revenue growth and profitability and take an investment call thereafter," Nyati advises.

In an IPO note, analysts at Indsec Research had said that given the high total addressable market and very high degree of unorganised market share, Delhivery could vastly gain from formalisation of the logistics sector as it is backed by solid technology capabilities.

However, the nature of the business requires the company to burn cash in order to fuel growth. "We, thus, believe the IPO is for investors with a high risk appetite and who are ready to wait for the company to turn EBITDA positive on a sustained basis over the next 2-3 years,” they had said.