The Curious Case of Different Views on Real Estate in Delhivery – Explained


  • While Credit Suisse gave Delhivery an ‘outperform’ rating, IIFL Securities advised investors to sell the stock because it is on a tightrope.
  • On June 2, Credit Suisse gave an optimistic view of the stock while IIFL Securities highlighted Delhivery’s poor performance and advised investors to sell the stock.
  • Delhivery’s journey into the stock market shows that it is clearly struggling to gain investor confidence.

At the moment logistics company Delhivery can go either way: take a step towards profitability or incur more losses or take too long to fulfill its promise. In addition, two major brokers expressed different opinions about what the future will look like.

While Credit Suisse gave it an “outperform” rating, IIFL Securities advised investors to sell the stock as it resembles a tightrope walk.

Strong presence in the e-commerce industry
Delhivery has a strong 25% market share within the e-commerce industry with top clients such as Amazon, Meesho, Flipkart and similar others. The asset-light model combined with technology and automation shows that it has attractive growth prospects.

While this gives the company an edge and advantage in a growing express parcel services market, 44% of its revenue comes from five customers with high dependency and concentration.

“The company doubled package volumes in FY22; strong market share of 24-25% in Q3 FY22 in all e-commerce package volumes and nearly 60-65% in ex-captive. Delhivery has a common mesh network and different services generate positive synergies for everyone else. The evolving in-house technology platform supports all of its operations,” said Credit Suisse.

It also played a part in the B2B logistics space by acquiring Spoton with express delivery, supply chain and cross-border offerings. This expansion was funded through several rounds of fund infusion.

On the other hand, IIFL believes that Delhivery’s focus on automation, scale and vigor is good, but may face implementation issues. It believes that the risk-reward ratio is unfavorable and investors should therefore wait for a better entry point.

“At current valuations, the stock appears to be pricing in seamless strategy execution to integrate complex business, manage costs, pass on economies of scale to consumers, and still become profitable,” IIFL Securities analysts said in their first report. about the company.

Internet company or logistics company?
Credit Suisse, however, backs its valuation and believes the share price will rise 26% within a year. It is believed that Delhivery will definitely be profitable as the sector is ripe to become profitable. The company has strengthened its accessibility, infrastructure and execution process over the years, especially after the acquisition of Spoton.

“We prefer Delhivery over other internet peers, with no customer acquisition costs, diversified growth – e-commerce and broader logistics; and cheaper valuation for the same growth game,” said Credit Suisse.

However, IIFL compares Delhivery to other logistics players. Other niche players in the logistics industry, it says, compete on differentiated services, but Delhivery only competes on price — and its wafer-thin margins could impact future profitability.

“Since about 85% of total costs are variable, it is necessary to consider how Delhivery plans to improve its operational efficiency, gain more leverage, pass the share of such profits on to consumers, and still achieve a meaningful EBITDA margin. books in the absence of any significant price increase,” says IIFL.

Delhivery also links its appreciation to other consumer technology companies rather than logistics players such as Blue Dart.

“If you think of us as a consumer technology company, we are grossly undervalued. Because if you look at all those consumer technology companies that have been listed recently, their revenues aren’t growing as much as ours is. Our earnings are 4x that of those companies; we are growing at 65% pace along with operating profitability,” said Sandeep Barasia, chief business officer at Delhivery in an interview with

But even those who agree to treat it as a consumer technology company seem to have their reservations. It all depends on the sector to which he belongs how much leeway can be given relative to the fact that he is still losing.

Delhivery’s losses are down 43% to 1,011 crore in FY22, compared to three years ago, but some believe the losses do not justify valuations.

“From a fundamental point of view, Delhivery is still a loss-making company with no clear path to show profitability. The PE ratio with FY22 numbers was very high with a range of 100-130, so because they’re so overvalued, the numbers and fundamentals don’t really justify the price we’re looking at,” Neha Khanna, president, told India .

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