Delhivery tanks 16% on tepid Q2 update

Shares of logistics major Delhivery tumbled as much as 16% to ₹471.15 apiece on Thursday after the Gurugram-based company said it expects moderate growth in shipment volumes through the rest of the financial year.

"Consumer discretionary spending remained muted due to continuing high levels of inflation, with average user spends and total active shoppers remaining flat or lower during the ongoing festive season, as per the industry reports," the company says in its second-quarter business update.

Market sentiment in Q2 continued to remain broadly unchanged from Q1, the logistics firm says, adding that industrial output also remained weak in the first two months of the quarter.

Express parcel volumes remained stable in Q2 and picked up towards the end of the quarter, driven by festive season sales, especially in the heavy goods category, Delhivery says.

Overall service line volumes for the business grew in the high teens in Q2FY23 over a large base of the same quarter last year (Q2FY22).

"While the festive season sale surge in shipment volumes will spill over to Q3FY22 as well, we anticipate moderate growth in shipment volumes through the rest of the financial year," the company says.

"In spite of the challenging market conditions, our market position remains strong owing to our structural cost advantages, network size and investments in capacity," it adds.

The company says its Part Truckload (PTL) business faced operational challenges in the first quarter due to integration of Delhivery and recently acquired SpotOn networks.

Volumes in the company's supply chain services and truckload businesses declined sequentially owing to the expected effects of seasonality in its customers' businesses. However, both businesses have shown substantial double-digit growth compared to Q2FY22, says Delhivery.

Delhivery claims it onboarded over 200 new customers in Q2FY23, driven by improving service metrics. "We expect volumes to continue to show a gradual scale up through FY23," it says.

Going forward, the company remains watchful of the market sentiments. "We have made sufficient capacity investments in FY22 and early FY23 to sustain our current rate of growth and expect new mega-gateway and sorter decisions only by early FY24. As inflationary pressures and service disruptions due to monsoon ease across the country we expect improvement in volumes, revenue and service margins going forward," the company further says.

Delhivery made its stock market debut on May 24 this year, with shares listing at ₹493 apiece on the BSE, a premium of ₹6 or 1.2% over its issue price of ₹487. The company raised ₹5,235-crore from initial public offering (IPO), which was fully subscribed despite challenging market conditions. The issue, which opened for subscription between May 11 and May 13, was subscribed 1.63 times, even after receiving tepid response from retail and non-institutional investors. Ahead of the IPO, Delhivery 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.