Delhivery IPO opens today: The Initial Public Offer (IPO) of Delhivery Limited, a logistics and supply chain firm, is all set to open for subscription from Wednesday, May 11, 2022. The Rs 5,235 crore IPO will close on May 13, 2022. The price band set for the IPO is between Rs 462-487 per share.  

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The company to raise up to Rs 4,000 crore OFS (Offer For Sale) and Rs 1235 crore Fresh Issue via IPO. Investors such as Deli CMF Pte. Ltd, CA Swift Investments, SVF Doorbell (Cayman) Ltd, Times Internet Limited, Kapil Bharati, and Mohit Tandon too participate in OFS.  

The net proceeds shall be used to fund organic growth initiatives and through acquisitions and other strategic initiatives along with other general corporate purposes. Morgan Stanley India, Kotak Mahindra Capital, BofA Securities India, Citigroup Global Markets are Book Running Lead Managers.  

As Delhivery IPO subscription begins today, Zee Business managing Editor Anil Singhvi highlighted positive and negatives of the company and recommended to avoid the issue. 

Positives: Delhivery’s revenue growth has been impressive for the last three years, and demand for logistics and supply chains is rising. Besides, freight corridors and infra have been created for both road and railway. The company would have Rs 6500 crore cash post IPO and young management. 

Negatives: Despite high revenues, the company is loss-making, and no listed loss-making company is trading in the green be it a Zomato or Paytm for instance. Negative cash flow and expensive valuations are the other two major factors, Singhvi suggested to Avoid this IPO.  

Yesha Shah, Head of Equity Research, Samco Securities, said the Indian logistics business is poised for tremendous expansion and Delhivery has promising growth potential ahead of it. Although the company's revenues are increasing at a rapid pace, the company's EBITDA and cash flow from operations remain negative.   

We expect that the company will continue to experience increasing cost pressures, at least in the short term, due to rising fuel costs. In addition, the issue looks to be sharply valued at a price-to-sales ratio of 5.5x of annualised FY22 revenue, when compared to its listed peers.   

Considering the current increasing interest rate environment, where valuations of high growth companies across the globe are taking a beating, Delhivery’s expensive valuation is concerning. So we have an AVOID rating for this IPO.