Before you apply for Delhivery IPO shares, here's what you need to know

As I was preparing to leave for work in the morning, Delhivery's continous IPO advertisements on India Today TV caught my attention. As the advertisement made rounds after every bulletin, I had certain questions:

1. Who are these Delhivery guys? 
2. What is happening in this IPO?

I read (way too much) about the rest of the IPO details on my local train journey and here is everything important that you need to know about it: 

FIRST, THE IMPORTANT DATES

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1. The public can subscribe to the shares from today ie. May 11
2. The subscription period closes on May 13
3. Delhivery will allot shares to applicants on May 19
4. If you don't get allotted shares, you will get a refund by May 20
5. If you are lucky to get shares, the shares will be credited to your Demat account by May 23
6. Delhivery finally lists on the BSE and NSE and trading begins on May 24

HERE ARE THE OTHER MINISCULE (BUT IMPORTANT) IPO DETAILS

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1. If you want to apply for 1 lot, you have to buy at least 30 shares.
2. The price range for each share ranges between Rs 463 to Rs 487. Meaning you will have to pay a maximum of Rs 14,610 for 1 lot.  
3. Delhivery will raise Rs 5,235 crore from this IPO by multiple means. The company will raise Rs 4,000 crore by issuing new shares to the public and the balance Rs 1,235 crore by selling old shares held by previous owners. 
4. After it receives Rs 4,000 Crore from the IPO, Delhivery plans to spend this money in multiple ways. The management plans to organically grow the company (Rs 2,000 crore), fund strategic initiatives (Rs 1,000 crore), and use the balance money for other general corporate purposes (Rs 1,000 crore) 
5. 75% of the IPO quota is reserved for Qualified Institutional Buyers (QIB) ie. banks and mutual funds, 15% is reserved for High Net-worth Individuals (HNIs) and 10% is for us ie. Retail category investors. 

OK, SO WHAT DOES DELHIVERY DO?  

For those who are unfamiliar with the brand, Delhivery is a super popular logistics company that helps businesses (B2B) and individual customers (B2C and C2C) transport their goods across India and the world. It services more than 17,000 pin codes of the 19,300 PIN codes in India, thus having a great 90.6% coverage.

Delhivery mainly provides 5 types of services to function as a big brand in the supply chain management and logistics industry. These are:

1. Express Parcel Delivery which means providing warehousing and delivery for e-commerce and regular courier parcels in India through a courier service.
2. Partial-Truckload Freight where the company uses its trucks to ship goods from different customers to different cities, ports, and airports. 
3. Truckload Freight where Delhivery uses its proprietary technology to transport and track its consignments, and manage documentation and finances.     
4. Cross-Border Services where Delhivery provides technology and transportation services in partnership with FedEx. This includes all international shipping i.e air cargo services, and door-to-door and port-to-port express parcel services.
5. Supply Chain Services include warehousing, transporting, business intelligence, and providing infrastructure and tech support. This allows e-commerce brands to use Delhivery's warehousing and transport facilities.    

NOW, IS THIS A BIG COMPANY?

Delhivery is a Unicorn. A 'Unicorn' is a privately held company that is valued at over US$1 billion at some point (ie. Rs 7,727 crore as of today). Delhivery became a Unicorn in 2019 when it received funding of $413 million (ie. Rs 3,196 crore) from SoftBank and Carlyle Group.

But Delhivery has always received funding consistently for the last 10 years. Here are the top 6 fundings it has received over the years. 

NOW, WHAT DO THE NUMBERS LOOK LIKE? 

Though the company has been consistently making losses, its losses have been reducing over the last three years. When it comes to the company's revenues, Delhivery has been consistently growing by more than 30%. Even its asset size has been growing at a consistently good speed.

Photo: Delhivery

Though Delhivery has a strong market position in delivering parcels and solving operating problems in an unorganised market, experts have mixed reactions to this IPO. Why? Well, experts think that Delhivery's IPO price range is too high because of the hefty valuation.

Delhivery's competitor Bluedart, which is also a profit-making company, has a valuation of about Rs 16,000 to Rs 18,000 crore. But Delhivery's valuation, which amounts to Rs 35,000 crore, is way too much for a loss-making company.

Also, Delhivery's negative cashflows and rising operating costs (because of rising fuel prices) are causing investors to think twice before applying. 

WHICH EXPERT SAYS WHAT

Though many experts say that Delhivery is a great company for a long term investment in the stock market, here is what experts think about the IPO right now:

1. Yes, let's invest: Yes Securities

2. Invest, lekin dhyaan se: Choice Broking

3. Avoid: Samco Securities and Marwadi Financial Services

4. Not rated: Reliance Securities and Religare.

So, will you apply for Delhivery's IPO?