Delhivery Ltd: Poised For Greater Heights, Logistically Speaking

Incorporated in 2011, Delhivery Limited is an Indian logistics and supply chain company that offers a broad variety of logistics services, including express parcel and heavy cargo delivery, freight services, warehousing, supply chain solutions, cross-border express and supply chain software. The company also provides value-added services such as e-commerce return services, payment collecting and processing, installation and assembly services and fraud detection. Since its inception, it has successfully fulfilled over one billion orders across India. In order to service more than 18,000 pin codes, the company has established a nationwide network with a presence in every state. 

The organisation is able to deliver 24 hours a day, seven days a week and 365 days a year thanks to 21 automated sorting centres, 122 gateways, 93 fulfilment centres, 2,521 direct delivery centres and a team of over 86,000 individuals. Across a variety of industries, including fast moving consumer goods (FMCG), consumer durables, consumer electronics, lifestyle, retail, automotive and manufacturing, the company offers supply chain solutions to a diverse base of over 23,600 active clients, including e-commerce marketplaces, direct-toconsumer e-retailers, enterprises and SMEs. The goal of the company is to provide customers with the tools they need to run flexible, dependable and resilient supply chains at the most affordable prices. 

Sector Overview
In the corporate world, success in logistics translates to higher efficiency, lower costs, higher output, better inventory control, more efficient use of warehouse space, increased customer and supplier satisfaction and better customer experiences. As a result, logistics is now seen as the foundation of an economy. The fundamental tasks performed in the logistics sector include order processing, material handling, warehousing, inventory controls, packaging and transportation. Some of the big potentials ahead include an increase in online purchase frequency, increased e-commerce penetration in Tier III and IV cities and the development of new categories. Leading companies are increasingly focusing on end-to-end supply chain visibility and solutions.

The development of new automation systems drives operational leverage and service enhancements. The pandemic has left its footprint on most of the industries in the world. Obviously, the impact on the transport and logistics sector is big, ranging from supply chain disruptions to major effect on the country’s GDP. Economic analysts anticipate significant growth in 2022 despite the conflict between Ukraine and Russia and the ongoing supply chain disruptions as the global and domestic logistics sectors continue to recover over time. 

The worldwide logistics market was worth almost USD 8.6 trillion in 2020. The logistics market in Asia Pacific is the largest in the world, with a value of approximately USD 3.9 trillion. North America was the second-largest region, accounting for nearly USD 2 trillion. The Indian logistics sector was expected to be worth approximately USD 250 billion in fiscal year 2021. This industry is expected to expand to USD 380 billion by 2025 with a compound annual growth rate (CAGR) of 10-12 per cent.

Financial Overview
For the fourth quarter that ended on March 31, 2022, Delhivery reported a net loss of ₹116 crore. The business reported a loss of ₹118 crore at the same time last year. On the flip side, compared to the same quarter last fiscal year, Delhivery witnessed a more than twofold increase in revenue from ₹1,003 crore to ₹2,072 crore. In Q4FY22, the company’s total income climbed to ₹2,127 crore from ₹1,032 crore. Operating profit increased significantly by 1,729 per cent from Q4FY2’s operating profit of ₹6.48 crore to Q4FY22’s operating profit of ₹118.51 crore. Furthermore, the company’s full year financials reveal that its net loss climbed to ₹1,007 crore in FY22 from ₹415 crore in FY21, while revenue increased by 89 per cent to ₹6,882 crore. 

According to a regulatory filing, express parcel volumes increased by 101 per cent, greatly outpacing industry volume growth of around 40 per cent. The first and second waves of the pandemic caused a disruption in the business. However, after battling this crisis the company was able to successfully run its operations efficiently. On May 24, Delhivery listed on the stock exchange, raising ₹5,235 crore. The IPO had a 23 per cent subscription on the second day of the subscription window, indicating a lack of investor interest for fresh issuances in a gloomy market. The issue was eventually subscribed to 1.63 times through retail participation. 

According to BSE data, Delhivery had a market capitalisation of ₹50,711 crore on July 21, 2022 and was ranked 95th overall in terms of market capitalisation. The business now belongs to the exclusive club of the most valuable listed companies. Institutions own 14.85 per cent of the stock, of which 8.02 per cent is held by foreign portfolio investors (FPIs). Noninstitutional investors hold an enormous total share of 85.15 per cent. Since May 24, 2022, when it was first listed, the stock has been trading at its highest level. The share price has increased 18 per cent in just five trading sessions and since last month it has delivered returns of 40 per cent. 

Outlook
The ‘PM Gati Shakti National Master Plan,’ which includes the seven engines for economic transformation and logistics efficiency, was highlighted in the Union Budget 2022. Roads, railroads, airports, ports, public transportation, waterways and logistical infrastructure made up these seven engines. Improved logistics, better infrastructure and greater economic growth are all related. Thus, the government’s initiative was required given the situation of the logistics industry today. Along with this, the sector will benefit from the construction of multimodal logistics parks, 100 PM Gati Shakti cargo terminals and speedier goods trains on the rail tracks. 

The Indian government has made the right move by implementing the National Logistics Policy (NLP) to eliminate inefficiencies in the industry. Although there are numerous potential sources of growth, globalisation, customer expectations and demand, e-commerce growth and cloudbased solutions are the four main ones for the logistics sector. The management of the supply chain has been made simpler by cloud-based operations for both small and large-scale organisations. Given that supply chain operations require huge data for effective management and tracking, it is a potent option. India’s logistics industry is anticipated to grow rapidly, helped by a number of government changes in the transportation and logistics sectors. With the help of e-way bills and Fastags, GST has converted all manual transactions to the digital format, thereby increasing system transparency.

Numerous start-ups in the logistics industry have contributed to the growth of the business by bringing a more creative solution to the market. However, there are also some difficulties that Indian logistics companies must overcome. Some of the challenges include obtaining big orders, transportation bottlenecks from bad roads, a lack of experienced workers, port and shipping issues, inferior warehousing facilities and fierce rivalry from the world’s leading companies in this space. Geopolitical situations are still causing major disruption. Meanwhile, the e-commerce market will continue to grow and individual businesses will likely face volatility in demand and increased client acquisition costs.

Given the company’s viewpoint, Delhivery Ltd. provides a wide range of services to over 23,600 clients while collaborating with prominent industrial leaders. As mentioned earlier, in terms of market capitalisation, it was placed 95th overall. The company has now joined the elite club of the most valuable publicly traded companies. Some of the accomplishments of FY 22 include the acquisition of Spoton and Transition Robotics, a strategic alliance with FedEx, an investment in Falcon Autotech, the delivery of one billion express parcels, the implementation of full and semi-automation at mega-facilities and the launch of platform services. As a result, given the excellent long-term prospects for the Indian logistics sector and the absolutely huge opportunities ahead for Delhivery Ltd., we recommend BUY.