It’s been quite a ride for the Delhivery Ltd stock, which is up 34% so far in 2025. At ₹464 apiece, the shares trade at about 115X FY26 estimated earnings, as per Bloomberg.
But the financials don’t exactly shout strength. The company’s FY25 return on capital employed is only 2.5%, and return on equity is just 1.5%. So, given such thin return ratios, what are investors thrilled about?
The key reason is that Delhivery finally managed to report its first-ever full-year profit in FY25, earning ₹162 crore. Moreover, the company’s Ebitda margin rose to 6.5% in the June quarter (Q1FY26) from 4.5% in Q1FY25. Even the truckload business, which was a drag earlier, gained pace with the margin rising to 10.7% from 3.2%. Ebitda is short for earnings before interest, taxes, depreciation, and amortization.
The devil in the details
It is worth noting that a big part of FY25 profit came from an accounting change. Delhivery switched its depreciation method from written-down value to straight-line method. That move alone cut about ₹230 crore from depreciation costs.
Management explained that automation assets are lasting longer than expected, and the change brings them in line with global peers. This is a fair argument indeed, although FY25 profit would have looked red without this accounting adjustment.
Meanwhile, the express parcel segment, Delhivery’s largest, contributing about 60% of revenue, saw margins slip to 16.2% in FY25 from 18.4% in FY24 due to rising costs and pricing pressure. Revenue growth also slowed down to 9.7% in FY25 versus 12.7% in FY24. Express parcel volumes barely grew; thus, most of the revenue growth came from higher prices.
For a logistics company, that’s not exactly inspiring, because volumes are viewed as the real growth driver. Since Delhivery is already the biggest player in the sector, expecting abnormal growth from here is unrealistic. Which means the only way to justify the stock’s valuation is by improving margins, and whether that will happen remains to be seen.
Then there is the matter of capital allocation. Delhivery spent ₹1,407 crore to buy Ecom Express. It aims to retain only about 30% of ECom’s customers. Essentially, Delhivery has spent to buy customers it could have acquired organically anyway. ECom Express’s annual revenue is about ₹800 crore, or less than half of Delhivery’s quarterly revenues.
Delhivery has been cutting costs to improve profitability. Freight, handling, servicing, and employee expenses all declined sequentially in Q4FY25 and were steady in Q1FY26. Employee count at around 62,000 fell by over 8% in Q4FY25 and was steady in Q1FY26.
Overheads dropped to 9.1% of revenue in Q1FY26 versus 11.4% in FY23. The management aims to bring this down further to 6-7% in the medium term.
No more big spending
After years of heavy capital expenditure on infrastructure and automation, Delhivery is also shifting gears towards a ‘monetize-assets’ phase. This means no more big spending on new facilities for now, and instead, focusing on squeezing more out of what they already have.
True, costs are coming down, profits have appeared for the first time, and some parts of the business are improving. But the bigger risks cannot be ignored. What if Amazon or Flipkart, with their deep pockets, decide to go full throttle into logistics? To be sure, these are not just wild possibilities, but real threats that could shrink Delhivery’s addressable market.
Analysts’ estimates for FY26 or FY27 broadly show Delhivery’s return ratios still below 10%. Current valuations suggest investors are paying up for solid earnings that will continue far into the future, assuming robust execution and no surprises from competition.
