The initial public offering (IPO) of logistics services provider Delhivery opened for subscription today, with the issue receiving 4% bid in the first hours. The issue, which is a mix of fresh issue and offer for sale (OFS), will remain open for bidding till May 13, 2022, at a price band of ₹462-487 a share. The Gurugram-based logistic company aims to raise ₹5,235 crore via IPO, from ₹7,460 planned earlier, consisting of a fresh issue of ₹4,000 crore and ₹1,235 crore through stake sale by existing shareholders.

As per data available on the National Stock Exchange (NSE), the issue was subscribed 4% against IPO size of 6.25 crore shares of the company till 11:30 am. The portion reserved for retail investors was booked 21%, while quota for employees received 3% bid.

According to the document filed with market regulator SEBI, about 75% of the issue has been reserved for qualified institutional investors, 15% for non-institutional investors, and 10% for retail investors. The company has reserved shares worth ₹20 crore for employees, who will get a discount of ₹25 per equity share. Investors can bid for a minimum of 30 equity shares and in multiples thereof.

Ahead of the IPO, Delhivery has raised ₹2,347 crore from 64 anchor investors by allocating a total of 4,81,87,860 equity shares at ₹487 apiece, the upper end of the price band. The anchor investors who participated in the bid includes AIA Singapore, Amansa Holdings, Aberdeen New India Investment Trust Plc, Goldman Sachs, The Master Trust Bank of Japan, Government of Singapore, Monetary Authority of Singapore, Fidelity, Tiger Global Investments Fund, Steadview Capital Master Fund, Morgan Stanley Asia (Singapore) Pte, Societe Generale and Segantii India Mauritius.

Adding to it, SBI Mutual Fund (MF), HDFC MF, ICICI Prudential MF, Mirae MF, ICICI Prudential MF, Invesco MF and Nippon India also participated in the anchor bidding round.

The IPO will see Delhivery's co-founders as well as investors Carlyle Group and SoftBank offloading their stake in the logistics company through an offer for sale. CA Swift Investments, an entity of Carlyle Group, will pare shares worth ₹ 454 crore, while Softbank Group’s arm, SVF Doorbell (Cayman), will sell ₹365 crore share. Among others, Times Internet will offload shares worth ₹165 crore, and Deli CMF Pte Ltd, a wholly-owned subsidiary of private equity fund China Momentum Fund, L.P. will sell shares worth ₹200 crore.

Meanwhile, Delhivery's co-founders - Kapil Bharati, Suraj Saharan, and Mohit Tandon - will divest shares worth ₹5 crore, ₹6 crore, and ₹40 crore, respectively.

The company intends to use IPO proceeds for funding organic growth initiatives, and inorganic growth through acquisitions and other strategic initiatives, besides general corporate purposes. It will use ₹2,000 crore to fund organic growth initiatives like building scale in existing business lines and developing new adjacent business lines, expanding its network infrastructure, and upgrading and improving its proprietary.

Delhivery, one of the largest and fastest-growing integrated logistics services players in India, has received “SUBSCRIBE” rating from YES Securities. The brokerage has given a SUBSCRIBE rating to the IPO from a long-term perspective, citing that Delhivery is the largest and fastest-growing third-party express parcel delivery player having a unified infrastructure network, proprietary technology stack and capabilities.

Meanwhile, ICICI Securities has assigned “UNRATED” rating to the IPO, awaiting further progression on the path of achievement of positive cash flows. The agency raised concerns about Delhivery’s operating losses as well as integration of newer acquisitions. “The company has acquired assets (Aramex, Fedex, Primaseller, etc) and companies (Spot-on) as a part of its growth strategy. Failing to integrate newer acquisitions may impact profitability,” it says.

On the positive side, Delhivery has shown strong growth and built a recognisable brand in a segment marred by intense competition and low barriers to entry, the brokerage says in its report. With a pan-India presence and diversification into other segments (LTL, omnichannel etc), the management seeks to utilise the scale to further optimise, cross utilise its network and lower costs, it adds.

In the first nine months of the financial year 2022, the logistic company incurred a loss of ₹891.14 crore, while it reported a loss of ₹415.7 crore in FY21. Revenue stood at ₹4,911 crore in the April-December period of FY22, and ₹3,838 crore in FY21. The company posted a negative free cash flow of ₹246 crore in FY21 versus ₹848 crore in FY20.

Delhivery was incorporated as “SSN Logistics Private Limited”, a private limited company, on June 22, 2011. The name was changed to “Delhivery Private Limited” on December 8, 2015, and then to “Delhivery Limited” on October 12, 2021. Kotak Mahindra Capital, Bofa Securities India, Citigroup Global Markets, and Morgan Stanley India are the book running lead managers for the public issue.

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