Tag: logistics

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Delhivery Limited IPO: All You Need to Know

The IPO frenzy within the Indian startup ecosystem resumes! Logistics and supply chain startup Delhivery has launched its three-day initial public offering (IPO). In this article, learn all about the company and its IPO.

Company Profile – Delhivery Limited

Delhivery Ltd is the fastest-growing fully integrated player in the logistics services market in India in terms of revenue as of FY21. The Gurgaon-based firm offers a wide range of logistics services, including express parcel delivery, heavy goods delivery, truckload freight, warehousing, cross-border express, and supply chain software. They also offer value-added services like e-commerce return services, payment collection & processing, installation & assembly services, and fraud detection.

Delhivery’s customers primarily include e-commerce marketplaces, direct-to-consumer (D2C) e-tailers, and small & medium enterprises (SMEs). 

As of December 31, 2021 (Q3 FY22), the company’s total active customer base stood at 23,113. It posted a Rate Automated Sort Capacity of 3.70 million shipments per day during the same period. Delhivery has built a pan-India network. It services 17,488 PIN codes, covering 90.6% of the total 19,300 PIN codes in India! Its network infrastructure includes 124 gateways, 20 automated sort centres, 83 fulfillment centres, 35 collection points, 24 returns processing centres, and 2,235 direct delivery centres.

The size of the company’s active customers has grown four times in the last three financial years. They have also seen significant growth in PIN code reach and delivery points. Since its inception, Delhivery has invested heavily in cutting-edge engineering and technological capabilities to drive growth. They are backed by prominent venture capital firms like SoftBank and Tiger Global.

About the IPO

Delhivery Ltd’s public issue opens on May 11 and closes on May 13. The company has fixed Rs 462-487 per share as the price band for the IPO.

The fresh issue of shares (of the face value of Rs 1 each) aggregates to Rs 4,000 crore. The IPO also includes an offer for sale (OFS) by promoters and early investors, aggregating to Rs 1,235 crore. Individual investors can bid for a minimum of 30 equity shares (1 lot) and in multiples of 30 shares thereafter. You will need a minimum of Rs 14,610 (at the cut-off price) to apply for this IPO. The maximum number of shares that can be applied by a retail investor is 390 equity shares (13 lots).

Delhivery will utilise the net proceeds from the IPO for the following purposes:

  • Funding organic growth.
  • Funding inorganic growth through acquisitions and strategic initiatives.
  • General corporate purposes.

Financial Performance

Delhivery Ltd is yet to post profits. However, its revenue growth has been impressive. The company’s topline has grown at a CAGR of 48% from FY19 to FY21. Revenue from contracts rose 31% YoY to Rs 3,647 crore in FY21. Like most startups, Delhivery has been burning cash to focus on scaling its operations. It posted a negative free cash flow of Rs 246 crore in FY21, compared to Rs 848 crore in FY20. It may take them a few years to achieve profitability.

Freight, handling, and servicing costs surged to Rs 3,480 crore during the first nine months of FY22 from Rs 2,026 crore in FY21.

Risk Factors

  • Delhivery has a history of losses and negative cash flows from operating and investing activities. 
  • The company relies on a scaled, automated, and unified network infrastructure for its business operations. The inability to maintain or expand its network infra will adversely affect its overall performance.
  • Any disruptions in Delhivery’s logistics and transportation facilities will severely impact its financial condition.
  • The company faces risks associated with shipments handled and transported through its network, which may not be fully covered by insurance policies.
  • Delhivery’s business and growth are highly correlated with the growth of India’s e-commerce industry. The inability to efficiently diversify into other industry verticles could harm its overall operations.

IPO Details in a Nutshell

The book-running lead managers to the public issue are Kotak Mahindra Capital, Morgan Stanley India, BofA Securities India, and Citigroup Global Markets India. Delhivery Ltd filed the Red Herring Prospectus (RHP) for its IPO on April 30. You can read it here. Out of the total offer, 75% is reserved for Qualified Institutional Buyers (QIBs), 15% for Non-Institutional Investors (NIIs), and 10% for retail investors.

Ahead of the IPO, Delhivery raised Rs 2,347 crore from 64 anchor investors.

Conclusion

The Indian logistics sector has been progressing at a rapid pace as a result of the constant growth of e-commerce platforms. It has become vital to our country’s overall economic growth. According to Delhivery’s RHP, the logistics sector is expected to grow at a CAGR of 9-10% to ~Rs 28.1 lakh crore by FY26! Delhivery’s long-term growth is heavily dependent on its ability to control costs. It may also need to pass on any increase in operating expenses to customers. The company has planned to use the issue proceeds to scale up its existing business by setting up offices and expanding the support team.

Delhivery will be directly competing with leading firms such as Blue Dart Express, TCI Express, Allcargo Logistics, and Mahindra Logistics once it gets listed.

The company’s IPO shares are trading at a premium of Rs 7 in the grey market. Before applying to this IPO, we will wait to see if the portion reserved for institutional investors gets oversubscribed. As always, consider the risks associated with the company and come to your own conclusion.

What are your views on Delhivery Ltd’s IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.

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Editorial

Stocks That Could Rally During Christmas Season

Christmas, the season of joy and hope, is officially upon us! This is a special period when people all over the world take a break from their busy schedules and spend time with family. Even though it is considered to be a holiday season in Western countries, all stock markets remain open throughout this period (except for December 25). By going through historical data and trends, we have noticed that certain specific stocks show an impressive rally in the month of December. 

Our mission here at marketfeed is to help you make smart and informed decisions, which ultimately help you win in the stock market. Let us understand the interesting concept of a ‘Santa Claus Rally’ and find out specific stocks that could show a surge in the coming weeks.

What is a Santa Claus Rally?

A Santa Claus Rally is a sustained increase in the stock market that usually occurs in the second half of December. To be more specific, the period consists of the final five trading days of the year, combined with the first two days of the next year. This means that for the present financial year (FY20), we could witness a rally between December 27, 2020, to January 2, 2021. Multiple studies show that investors receive better-than-normal returns during the Santa Claus Rally. This particular phenomenon is very prominent in the US markets.

There are several theories used to explain the cause of a Santa Claus rally in December. Certain stock market experts believe that a general feeling of optimism during this season is one of the major reasons for such a rally. Investors would be in a festive mood and tend to infuse more money to buy stocks. Some people believe in buying more stocks in anticipation of a general rise in stock prices during the month of January. Individuals would receive holiday bonuses, which they utilise for making investments in the stock market. Traders may also like to wind down their (short) trading positions early in December to enjoy the holiday season with their families.

Another theory is that large institutional investors, who are often pessimistic (bears), tend to go on vacation during this period. This leaves the stock markets for small retail investors, who tend to be more bullish. However, do bear in mind that stock markets could become highly volatile during the Christmas-New Year period.

Interestingly, over the last few decades, our Indian stock markets have shown an impressive rally throughout December.

Specific Sectors That Could Benefit During Christmas

Retail Sector

The Indian retail sector had received a massive boost as a result of high demand during the festive season (Diwali) in November. As we know, the Covid-related lockdowns caused major difficulties in terms of supply chain disruptions. However, we can now see that the operations of retail firms have returned to normal. The surge in demand seen during the October-November period has continued or sustained onto December. 

The Christmas season is one of the busiest periods for all retail companies. At the same time, it is the most profitable season for them. They often receive huge orders from the domestic as well as international markets. The retail firms that supply or sell good quality Christmas-related products would perform relatively well. There is a great demand for products such as interior holiday decorations, bakery items, electronic items, Christmas trees & lights, Christmas stars, and much more. We also see a huge consumption of poultry during Christmas and New Year. This is also a period when retail firms come up with attractive offers to increase sales.

Do keep a close watch on stocks such as Avenue Supermart, Trent, V-Mart Retail, Spencer Retail, and V2 Retail.

Logistics Sector

The Indian manufacturers of certain Christmas items often export their products to countries around the world. Logistic firms are the heroes that ensure that orders are accurately shipped and delivered. The international distribution chains work 24/7 and help people around the world to get their Christmas gifts/orders on time. These companies have established a proper distribution network in India as well.

Stocks such as Snowman Logistics, Mahindra Logistics, Blue Dart Express, Gati, Navkar, Allcargo can be closely watched.

With the arrival of the Covid-19 vaccine, Indian logistics firms are expanding their operations to meet any demand that may arise for its distribution. marketfeed had prepared a very detailed article on certain logistics stocks that could show a rally in the coming months. You can read it here.

Textiles & Apparel Sector

Christmas is a period when we see a huge increase in the demand for clothes or clothing materials. Since it is a holiday period, people would be flooding branded stores to be ready for the next year. We also see a great demand for Indian-made dress materials and cloth from the international market as well. There are specific companies such as Kitex and Bombay Dyeing that have established a great market for their products in multiple countries.

Stocks of companies such as Page Industries, Kitex Garments, Raymond, Bombay Dyeing, Arvind, Aditya Birla Fashion & Retail, and KPR Mill could be watched closely. 

Automobile Sector

Historically, we have seen the automobile industry as a whole show an increase in revenue or sales during the period between November and January. The positivity surrounding Diwali, the festival of lights, had helped certain automobile manufacturers to reach pre-Covid sales levels. We could see this sustained growth during the Christmas period as well. Prominent Indian automobile brands that have a well-established market in foreign countries could be specifically looked into.

There have been reports stating that many automobile manufacturers are going to increase the prices of their cars or two-wheelers from January 2021. Thus, we could see an increase in vehicle bookings this month. The offers and discounts offered by these companies during the holiday season would also encourage people to purchase cars in December. 

Do keep a close eye on prominent automobile stocks such as Maruti Suzuki, Tata Motors, Hero MotoCorp, Bajaj Auto, TVS Motors, Eicher Motors, etc.

Conclusion

We have only stated a few examples of how specific sectors could show positive growth during the next two weeks. Do let us know in the comments about your thoughts on certain other stocks that could show a rally during the Christmas season.

As mentioned before, historical data shows that stock markets typically show a bullishness during the Christmas season. At the same time, the markets could become volatile during this period. So, investors will have to be very cautious and disciplined while entering into trades. Our own Nifty 50 and Sensex had already crossed their all-time highs, and have started consolidating. Will we witness a Santa Claus rally in our markets this time? We will have to patiently wait and watch. Until then, marketfeed wishes all our readers a very Happy Christmas!

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Editorial

Logistics Firms That Could Benefit from Covid-19 Vaccines

Three major pharmaceutical companies have approached the Indian drug regulator for emergency use authorisation of their respective Covid-19 vaccine candidates. This includes the vaccine developed by Pfizer-BioNtech, Serum Institutes’ Covidshield (which is developed by Oxford-AstraZeneca), and Bharat Biotech’s Covaxin. All of us are eagerly waiting for the regulator to give a final verdict. 

Even if these companies get the necessary approvals, there still exists a major hurdle- how can the Covid-19 vaccine be distributed to the entire population of India? This is where logistics companies come in. Over the past few weeks, the stocks of logistics companies have shown an impressive surge. Let us take a look at potential firms that could help India to solve its vaccine distribution issue. One factor to be understood is that both cold chain and normal logistics companies will benefit, considering that there are multiple vaccines almost ready for deployment. So let us jump in.

Snowman Logistics

By now, Snowman Logistics Ltd would be a well-known company for all of us. It is India’s leading integrated temperature-controlled logistics company. They have over 31 warehouses across 15 cities. The company has also stated plans to expand its capacity to 33 cold storage facilities in 17 cities over the next two months. Snowman was one of the first companies which stated that they could offer the required logistics services for the Pfizer vaccine in India. As we know, this particular vaccine requires an ultra-cold chain of -70 degrees. Currently, Snowman Logistics’ can provide a storage and transportation chain for up to -30 degrees.

The company entered into a very promising partnership on December 10. Snowman Logistics and SpiceJet have signed a Memorandum of Understanding (MoU) for jointly distributing Covid-19 vaccines across India. As per the deal, Snowman will handle the ground services which include activities such as transportation to/from manufacturers, packing, and storage – all in the required temperature zones. SpiceJet will provide air connectivity for temperature-controlled distribution of the COVID-19 vaccines across India, as well as internationally.

Over the last 5 weeks, the share price of Snowman Logistics has gained 96%! marketfeed had prepared a very detailed analysis of the company. You can read it here.

Blue Star

Blue Star Limited is a leading manufacturer of air conditioners and commercial refrigerators. It is not strictly a logistics company, but they offer a wide range of cold storage facilities. The company has 4 major manufacturing plants which are located in Dadra, Kala Amb (Himachal Pradesh), Wada (Maharashtra), and Ahmedabad. It is interesting to know the Blue Star has a presence in more than 18 countries in the Middle East, Africa, and South Asian regions. 

The company has stated that except for transportation facilities, it will offer a wide range of cold storage facilities for the vaccine. Blue Star is making sure that its deep freezers and ice lined refrigerators (ILRs) are ready to support the storage of Covid-19 vaccines in India. They have planned to conduct additional shifts between December 2020 and April 2021 at their manufacturing plants. This is to ensure that they are ready to meet any demands made by the vaccine developers.

Over the last month, the share price of Blue Star Ltd has jumped by more than 20%.

Mahindra Logistics

Mahindra Logistics Ltd (MLL) is one of India’s leading providers of third-party logistics solutions. The company serves more than 400 corporate customers across the world. They have 16 million sq feet of warehouse space and operate in more than 650 locations. The company is known for its supply chain management solutions.

At present, MLL does not provide cold chain logistics. However, the company stated that they have recognized the need/demand for cold chain facilities in pharmaceuticals. They are currently on their path for a huge expansion into the temperature-controlled logistics space. Mahindra Logistics has stated that they will be ready with their cold storage logistics facilities for the Covid-19 vaccine by the end of the current financial year. They have also hired experienced personnel in this particular field to help them provide the best service. 

The share price of Mahindra Logistics has increased by around 6.5% over the last one month.

Blue Dart Express

Blue Dart Express Ltd is a prominent logistics company based in Mumbai. It is owned by DHL and DHL Express (Singapore) Pte Ltd. The company has a cargo line known as Blue Dart Aviation, that operates in South Asian countries. It is also one of the leading logistical firms that are gearing up to take up the huge task of transporting Covid-19 vaccines in India. 

In October, Blue Dart announced that it will offer a complete supply chain solution for the life sciences and clinical trials sector. The company has also ensured that it will provide cold chain services to ensure seamless transport of shipments like vaccines.

Over the last few months, the company has taken a proactive role in increasing its infrastructure and improving its Temperature-Controlled Logistics platform. The company has assured that it is prepared to meet any immediate large-scale demand.

Allcargo Logistics

Allcargo Logistics Ltd is a leading logistics firm headquartered in Mumbai. The company provides services such as global multimodal transport operations, pan India container freight stations, third-party logistics, and much more. It also has world-class warehousing facilities that are also integrated with cold chain storage. Allcargo has a strong presence in more than 160 countries.

Over the last month, Allcargo Logistics’s share price has shown an increase of more than 15%.

Navkar Corporation

Navkar Corporation Ltd. is engaged in Container Freight Station (CFS) operations. They are focused on capitalizing on the available opportunities in the logistics space in Western India. The company has a dedicated cold storage facility in Maharashtra. Navkar’s CFSs have the capacity to store vaccines in temperature-controlled warehouses. So it can be a very interesting pick.

Over the last month, the share price of Navkar Corp Ltd has increased by more than 56%. This has probably not fallen under your radar and can be checked out.

Conclusion

We have only selected a handful of the prominent logistics companies that have shown their interest in catering to the vaccine distribution needs in India. There are other listed firms such as Tiger Logistics India Ltd and Arshiya Limited, whose share prices have also shown a similar surge.

Once we get a confirmation of a vaccine being approved in India, all these stocks could see a huge rally. These companies could enter into partnerships with major vaccine developers in the days to come. However, there still exist certain limitations with respect to the temperature requirements for the Covid-19 vaccines. We can see that Snowman Logistics and other firms are trying to develop the technology and increase their capacities to ensure proper distribution of the vaccine for all Indians. Pfizer has even said that they plan to use their own logistics facilities to distribute the vaccine in our country. 

Do keep a close watch on all these prominent logistics companies of India. Will they be able to deliver on their promises? Will these firms be able to actively support what is to become one of the largest vaccination drives in the world? Let us wait and watch.