Delhivery IPO: Markets Will Properly Value a Company Long Term: Sahil Barua, CEO of Delhivery

Bangalore: Sahil Barua, co-founder and CEO of Delhiverywhich will launch its initial public offering (IPO) for subscription on May 11, told ETtech that the logistics and supply chain company he was not worried about short-term valuations as markets eventually value long-term assets correctly. Barua was talking about how investors might have valued the company had it been listed last year amid the euphoria in the Indian startup ecosystem and capital markets in general.

Delhivery is aiming for a valuation of $ 5 billion when it makes its public market debut in a price range of Rs 462-487 per share. The price and size of the IPO was readjusted as macroeconomic and political sentiment became volatile globally earlier this year, although uncertainty continues.

Barua told ETtech that he accepted his expert board’s advice on the IPO and decided to move forward as “a large, mature and well understood business.” Delhivery should be able to solve the problem despite less than ideal conditions, she said.

“(Delhivery) has reached a stage in its evolution that gives us confidence… We have a mature business model. And we’re on track to reach $ 1 billion in revenue, “Barua said. He said that while Delhivery relies on technology, logistics is a business well understood by public market investors.

According to the company, it reported operating revenue of Rs 5,170 crore, or nearly $ 700 million, in the nine months of FY 22 ending December 2021.

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Barua, who co-founded Delhi more than ten years ago, along with Mohit Tandon, Bhavesh Manglani, Suraj Saharan and Kapil Bharati, said optimizing for short-term notional valuation gains makes no sense. Valuation would have played a bigger role, she said, if the IPO had had a larger share of the offering for sale (OFS), making a difference to investor exits.

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“If you look at large IPOs like DMart, it’s a stock that has never traded below its IPO price…. this is the ambition we have. We want to value it in such a way that our investors make a substantial amount of money and where ultimately there is very clear visibility into how the shares are made up, “said Barua, who owns 2.08% of the company and does not plan to sell none of its shares in the IPO.

Delhi was much valued at $ 3 billion
following a $ 277 million funding round from FidelityGIC and others last May
raised another 125 million dollars since the addition of the new venture fund of former Tiger Global partner Lee Fixel in September but
a sale of secondary shares by Fosun valued it at $ 4 billionETtech reported on October 4th.

New age companies like Zomato, Nykaa, Policybazaar and Paytm took a leap forward for local exchanges last year, but are now trading well below their highs since they’ve been listed. Paytm saw its share price drop by more than 70% from its issue price.

Barua said one of Delhivery’s biggest strengths is that it is not a discretionary business and that investors understand that these companies offer better solutions to solve logistical problems. They feel we’re not trying to change user behavior, she added.

He told ET that the company has also significantly improved its profitability over the past few quarters. “Growth and profitability are not conflicting goals for Delhivery at this point. And demand is now improving margins as operating leverage has started to take hold in the past three quarters, “he said. Delhivery had a negative EBITDA margin (earnings before interest, taxes, depreciation and amortization) of 0.57%. in the first nine months of fiscal year 22, compared to -11% in fiscal 2019, he added.

I will only review mergers and acquisitions in the core business

Sandeep Barasia, Delhivery’s executive director and chief business officer, said the Gurgaon-based startup is doubling down on expansion in India and will look into mergers and acquisitions in key operating areas that can add value to the company.

“Either these will be the assets that have helped us scale one of our segments faster or they will be the capabilities we do not have internally … What we will not do is take minority stakes, act as financial investors or buy assets that are not. crucial for us, ”Barasia told ET.

Of the public offering of Rs 5,235 crore, Rs 4,000 crore will be through a sale of primary shares while the remainder will be through an SFO of Rs 1,235 crore. In an SFO, existing investors sell some or all of their shares to new investors and the money does not go to the company.

In Delhivery’s OFS, investors such as Fosun will sell shares worth Rs 200 crore while SoftBank and Carlyle will sell shares for Rs 365 crore and Rs 454 crore respectively. Times Internet, which is part of the Times Group (BCCL), is also diving worth Rs 165 crore in the SFO.

Delhi plans to use Rs 2,000 crore from the IPO for organic expansion and another Rs 1,000 crore for inorganic growth through acquisitions and other strategic initiatives. The remainder of the proceeds will go to general business purposes, the company said.

“We have a very large addressable (domestic) market, which I have talked about several times. We will continue to double the address market, “said Barasia.

He said Delhivery continued to diversify after being an ecommerce focused company. In FY19, 85% of its business came from express packages, which are primarily e-commerce, he said. “If you look at the first three months of exercise 22, that’s 57%. 43% of the business is made up of unexpressed parcels. ”

Although Delhivery continues to focus on its business-to-consumer (B2C) delivery business, Barua said the company is unlikely to be a player in the fast delivery space (10-20 minutes) as the business model is still Evolving.

“If ever 10-minute delivery is something consumers are willing to spend on low-cost items, Delhivery will be as well positioned to do it as we are today. But at the moment it’s not just an area of ​​interest for us, “she added.