Delhivery, the SoftBank-backed logistics unicorn, plans to raise ₹5,235 crore next week through an initial public offering, a sign of IPO activity picking up after companies put the brakes on their plans to avoid a clash with Life Insurance Corp. of India’s mega-IPO and choppy markets.
The Delhivery IPO will open for subscription on 11 May. The price band has been set at ₹462-487 per share, valuing the company at ₹35,283 crore at the upper end of the band.
However, the issue size has been cut by a third from the initial plan to raise ₹7,460 crore because of volatility in equity markets.
Delhivery will be the first major IPO after a brief lull in activity as companies scrapped plans to go public after the Russian invasion of Ukraine and to avoid a clash with LIC’s ₹21,000 crore share, India’s largest initial share sale. Delhivery had filed for the IPO in November,
Investors’ reaction to the Delhivery IPO may determine whether other such startups will brave the choppy markets to go public.
Delhivery will raise ₹4,000 crore by selling new shares, and the company’s early investors will raise an additional ₹1,235 crore through an offer for sale (OFS).
The bidding for so-called anchor investors will open on 10 May, the company said. The three-day IPO will close on 13 May. The Gurugram-based Delhivery will list on exchanges on 24 May.
Of the total issue size, 75% of the shares on sale will be available for allocation to qualified institutional buyers (QIBs), 15% for non-institutional investors and the balance 10% for retail investors. Around 60% of the QIB portion is reserved for anchor investors.
The proceeds from the issue will fund the company’s inorganic growth plans via acquisitions and organic plans with focus on automation, technology and other strategies.
“Delhivery has appetite and ability to make larger acquisitions and integrate them within the company. We will continue to whole bunch of inorganic opportunities but immediate focus will of course be organic. Delhivery has less than half a percent share of a $300 billion market opportunity,” said Sandeep Barasia, Chief Business Officer of Delhivery.
Under the OFS, its shareholders including US private equity firm The Carlyle Group, Japanese Softbank Inc, Fosun group-owned China Momentum Fund and Times Internet will divest their ownership in Delhivery.
Carlyle will sell shares worth ₹454 crore from earlier plans to sell ₹920 crore through its affiliate CA Swift Investments; SoftBank via its investment vehicle SVF Doorbell (Cayman) Ltd will now sell a stake worth ₹365 crore, down from ₹750 crore. Fosun will sell via Deli CMF Pte Ltd, shares worth ₹200 crore, half from earlier ₹400 crore sale plan and Times Internet will sell up to ₹165 crore from previously.
In addition, Delhivery’s co-founders -- Kapil Bharati (also its chief technology officer), Mohit Tandon and Suraj Saharan-- will sell shares worth ₹5 crore, ₹40 crore and ₹6 crore, respectively.
With a 22.78% stake, SoftBank is the largest shareholder in Delhivery, while Nexus Ventures and Carlyle hold stakes of 9.23% and 7.42%, respectively.
The company’s three founders hold relatively small stakes. While Kapil Bharati holds 1.11%, Mohit Tandon owns 1.88% and Suraj Saharan has a 1.79% stake.
Delhivery was founded in 2011 by Sahil Barua, Mohit Tandon, Bhavesh Manglani, Suraj Saharan, and Kapil Bharati as a hyperlocal express logistics services firm. It became a unicorn touching $1 billion valuation, in 2019.
It had last raised $125 million (₹922 crore) in September as additional funding from Addition -- a fund floated by former Tiger Global executive Lee Fixel, at a valuation of $3 billion.
It provides supply chain solutions to 21,342 active customers such as e-commerce marketplaces, direct-to-consumer e-tailers and enterprises and small businesses across several verticals like fast-moving consumer goods, consumer durables, etc.
Working on an asset-light model, Delhivery claims to be the largest and fastest growing fully-integrated logistics services player in India by revenue as of FY21 covering 17,488 PIN (postal index number) codes across India.
In FY21, it reported a negative free cash flow of ₹246 crore as against ₹848 crore in FY20. At the same time, freight, handling and servicing cost has risen from ₹2,026 crore in FY21 to ₹3,480 crore in 9MFY22.
“Through the last four years, unit economics have improved. Adjusted EBITDA has grown from -11.3% to almost breakeven. If you just look at nine months, the second two-quarters of FY22 on a combined basis were actually profitable, vis-à-vis the first quarter of FY22. We are pretty much at breakeven,” said Amit Agarwal, Chief Financial Officer, Delhivery.
As its gains scale in India, Delhivery is also developing capabilities relevant to other markets and international growth will be focused on using logistics stack and logistics SAAS model.
Kotak Mahindra Capital Company Limited, Morgan Stanley India Company Private Limited, BofA Securities India Limited, and Citigroup Global Markets India Private Limited are the book running lead managers to the IPO.