Delhivery's Rs 5,235-cr IPO to open on May 11; price band set at Rs 462-487

Logistics company's anchor allotment on May 10 will demonstrate interest among investors for tech startups, say experts.

Logistics start-up Delhivery’s Rs 5,235-crore initial public offering (IPO) will open for subscription on Monday, May 11, and the issue will close on May 13. This will be the second-biggest offering so far this year after the Life Insurance Corporation of India (LIC).

The company’s market value on a post-dilution basis will be Rs 35,284 crore at the upper end of the price band of Rs 462-487 per share. The company is looking to raise Rs 4,000 crore in fresh capital through the IPO. The remaining Rs 1,235 crore will be an offer for sale (OFS) by private equity majors Carlyle and Softbank.

Delhivery plans to utilise Rs 2,000 crore of the issue’s proceeds for funding organic growth initiatives such as scaling up existing and adjacent business lines. It will use Rs 1,000 crore for funding inorganic growth. In the past five years, the company has undertaken over half-a-dozen strategic alliances and acquisitions to spur growth.

Delhivery’s IPO will once again test investors’ appetite for high-growth but loss-making firms. During a press briefing on Thursday, the company said it has been able to improve its operating profitability despite continued investments in building capabilities and rapidly growing its top line.

Delhivery has seen an improvement in adjusted Ebitda (earnings before interest, taxes, depreciation, and amortisation) margins from -11.35 per cent in FY19 to -6.95 per cent in FY21. The company’s operational profitability compares well against other start-ups such as Oyo, PharmEasy, Paytm, and Zomato, which had adjusted Ebitda margins between -59 per cent and -15.3 per cent in FY21.

Start-up IPOs were the toast of the market last year. However, the change in mar­ket dynamics have applied the brakes on share sales fro­m this space.

So far this year, 2-3 tech IPOs of over $500 million have hit the markets globally, which includes GoTo Gojek, an Indonesian ride-hailing player. Investment bankers said Delhivery’s IPO size and valuations have been realig­ned to the market conditions and after gathering investor feedback.

They said Delhivery’s anchor allotment on May 10 will demonstrate the strong interest among institutional investors both domestic as well as foreign.

Delhivery has a total addressable market (TAM) of over $300 billion. However, its market share is only half a per cent, underscoring the large untapped opportunity. At present, India’s logistic market is large and highly fragmented. The boom in the digital and e-commerce sector is expected to underpin the growth. India’s per capita direct logistics spend is only $150 per dollar compared to $4,460 in the US and $1,050 in China, as per the company’s investor presentation.