Can Delhivery deliver on its potential?

after a record-breaking year for IPOs in 2021, the trend appears to be rolling over to the new year with another exciting name getting the nod for its offering. Gurugram-based Delhivery will look to enter the bourses with a Rs 7,460 crore IPO, capitalising on the e-commerce boom in one of the world’s largest consumer markets.

will it be a hit or a miss?

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e-commerce has been one of the biggest success stories over recent years, growing pretty much hand in hand with the increase in internet penetration across the globe. some of the global giants of the trade such as Amazon and Flipkart have grown to their stature largely due to the excellent logistics networks they have built. thinking back to even just five years ago, guaranteed one-day delivery of millions of items off the internet was an unimaginable dream. yet today, it is reality, and it is propelling the meteoric growth of an industry estimated to be worth $4.89 trillion in 2021.

naturally, there are countless startups that have cropped up, offering niche products or trying to get noticed with innovative marketing and more. but they do not have the capacity to build out the same networks that their largest peers do. that is where third-party delivery providers such as Delhivery come into the picture. given that Amazon’s revenue for 2020 was ~$386 billion, it leaves a large TAM (total addressable market) of e-commerce players for these logistics providers.

leading the charge

globally, India is among the fastest growing e-commerce markets, registering a 27.6% growth over the previous year, in 2020. in this market, Delhivery is the leading third party logistics provider, growing at a 48.5% CAGR (compound annual growth rate) over FY19-21 and clocking a revenue of Rs 3,646.5 crore in FY21. It provides a full-range of logistics services, including delivery of express parcel and heavy goods, PTL (partial truck load) freight, TL (truck load) freight, warehousing, supply chain solutions, cross-border Express, freight services, and supply chain software.

in the express parcel segment which accounted for 70% of its FY21 revenue, it has a 20% share of the overall market which includes captive players such as Amazon and Flipkart. it also operated over 5.39 million sq. ft. of warehousing infrastructure across 71 facilities as of June 2021.

the Indian logistics market is highly fragmented, with over 85% of fleet owners operating less than 20 trucks, and smaller warehouses (less than 10,000 sq. ft.) account for nearly 90% of warehousing space in India. with organised players accounting for only 3.5% of the logistics market in FY20, there’s acres of space for growth ahead. Delhivery might be a good bet at capitalising on that opportunity.