If retail investors are applying, all you need to know

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After becoming a unicorn in 2019, logistics giant, Delhivery, is set to go public by launching the initial public offering (IPO) on May 11, 2022. The delivery startup aims to raise Rs 5,235 crore with this IPO.

All you need to know

Delhivery invites investors to subscribe for the IPO from 11 May 2022 to 13 May 2022. It is targeting a total issue size of Rs 5,235 crores, of which Rs 4,000 crores is new issue and Rs 1,235 crores are available for sale to investors. However, the initial issue size was Rs 7,460 crore which was later reduced. The company’s share price range has been set between Rs 462 and Rs 487.

According to reports, employees of the company will be entitled to a rebate of Rs 25 per share. But other investors can bid for a minimum of 30 shares. Moreover, at Rs 16, its shares are available at a gray market premium (GMP), according to market experts.

Company overview

With an investment of US$100 million in July 2021 from the US delivery giant, FedEx Express, Delhivery has a reach of 17,488 PIN codes and an infrastructure of 14.2 million square feet with over 3,836 delivery points.

The company, which was founded in May 2011, offers five types of transportation services: express parcel, less than truckload, truckload, supply chain and cross-border. Express parcel services account for more than 62% of fiscal 2021 revenue, while LTL services account for 11.5%.

The company has 23,113 majorities of customers, which includes e-commerce marketplaces and direct-to-consumer online retailers. The company focuses on the B2C business model, but it recently launched C2C services.

Based on FY22 annualized numbers, the IPO price is 4.8x EV/sales and 5.2x book value in the upper IPO price range . The company reported an EBITDA loss of Rs 232 crore and a net loss of Rs 891 crore for the nine months ending September 2021 (9MFY22).

Should I subscribe IPO of Delhivery?

Prospective investors will be able to subscribe to the Delhivery IPO for the next two days. Stock Experts Experts watching the scenario have varying views on whether investors should go for this IPO.

Yash Gupta, equity research analyst at Angel One Ltd, gives it a neutral stance. According to him, in Indian markets, no other peer group has the same business model as Delhivery.

“The company delivered good revenue growth of 82% in 9MFY2022 and it is expected that the company could become EBITDA positive by the end of fiscal 2022. Given the expensive valuation, we attribute a NEUTRAL recommendation to the Delhivery IPO”,

However, others differ and say it could be a downside investment risk.

Dinesh Gupta, co-founder of UnlistedZone, a company that trades unlisted stocks, told CNBCTV18 that seeing recent unicorn listings might not make investors feel positive about a loss-making company. Similarly, Abhay Doshi, co-founder of Unlisted Arena, also told the news house that risky market sentiments and investor concerns about loss-making startups could dampen interest.

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