Logistics firm Delhivery tests mood for India IPOs after LIC's muted debut

The first day of trade for logistics company Delhivery will give an indication of appetite for newcomers in Mumbai shortly after Life Insurance Corporation (LIC) of India’s frustrating debut.

Delhivery is set to list on Tuesday after an initial public offering (IPO) that raised Rs 5,235 crore ($684 million) — India’s second-largest this year after LIC’s milestone deal. Similarities between the two offerings include a cut in final proceeds, a delay on the back of volatile markets, and a rush by funds to place bids in the final hours.

The logistics and supply chain start-up and shareholders were initially seeking to raise about $1 billion in a deal expected to price in March. But that was before IPOs globally got tainted by woes tied to rising inflation and central banks raising rates, plus risk-off sentiment triggered by the war in Ukraine.

Among holders selling shares in Delhivery’s IPO are SoftBank Vision Fund and Carlyle Group Inc. In the end, Delhivery shares received 63 per cent more bids than the amount being sold, with a pick-up in demand coming in the last day and supported mostly by qualified institutional buyers.

The last-minute rush was similar to LIC’s IPO, when foreign institutional investors stepped up their orders in the last hours before the close of subscription on May 9.

Both deals priced at the top of the marketed range, which can be seen as positive, given how poor sentiment is globally towards new share sales. But in LIC’s case, many investors sold shares as soon as they could after the company debuted on May 17. The stock is down about 12 per cent from the listing price.

“In the current environment where tech valuations have cratered, investors are increasingly unwilling to value companies, particularly IPOs, on growth-adjusted multiples,” said Arun George, an analyst at Global Equity Research, which publishes on platform Smartkarma. George sees Delhivery priced at a “material discount to peers”.

An eventual negative start for Delhivery on Tuesday, following LIC’s flop, could cast a shadow on other large-sized offerings expected in India.

E-commerce start-up FirstCry, also backed by SoftBank, will delay an IPO by a few months amid broader market headwinds.

Bloomberg News reported in April that the offering could raise about $700 million. Go First, the country’s No. 2 airline, is seeking to raise about $464 million in July as it plans to use the proceeds to repay debt.