Delhivery, India’s largest integrated logistics player, started its journey in 2011 as a hyperlocal food delivery startup. But the founders quickly spotted a bigger opportunity. E-commerce was in its infancy, yet already showing signs of a massive, underserved market — a bigger TAM (Total Addressable Market). So, by the end of 2011, Delhivery had pivoted to logistics.
Eleven years later, in 2022, Delhivery listed on the NSE and BSE at a market valuation of Rs 35,000 crore. The IPO brought strong returns — just not for public market investors.
The stock, which peaked at Rs 670 in July 2022, has since fallen to Rs 247.
Source: http://www.tradingview.com
The Ecom Express acquisition
Recently, Delhivery announced that it will acquire Ecom Express, a competitor in the express delivery space, for Rs 1,407 crore — well below its previously targeted IPO valuation. As of December 2020, Ecom Express had an unaudited net worth of Rs 998 crore.
Ecom Express was a casualty of a broader trend in the e-commerce industry wherein large players have been “in-sourcing” logistics, i.e., owning the delivery supply chains to improve the delivery experience, reduce costs at scale, and improve returns handling.
Ecom Express also violated the first principles of business. An estimated 30-40% of its volumes came from Meesho. When Meesho decided in February 2024 to ‘in-source’ via its logistics arm, Valmo, Ecom Express’s business began to unravel.
In a last-ditch effort to survive, Ecom Express filed for an IPO, which SEBI approved in December 2024. But Delhivery pointed out discrepancies in the IPO: “Ecom Express double counts the number of RTO (return to origin) shipments and hence it ends up inflating its volume on a like to like basis”.
Story continues below this ad
So when Delhivery announced that it would be acquiring Ecom Express at a fraction of its IPO valuation — far below its IPO target of Rs 2600 crore — it looked like a win.
But was it?
Business model
Delhivery operates across five business segments. Express Parcel (60% of revenue) is the largest segment, focused on fast, small-parcel deliveries, mainly catering to e-commerce customers. Part Truckload or PTL (18.1%) handles mid-sized B2B freight weighing between 50 kg and 2500 kg. Truckload (6.7%) serves bulk cargo via a fleet marketplace. Supply Chain Services (8.6%) includes warehousing and fulfilment, and cross-border (6.7%) manages international logistics.
Source: Delhivery Q3FY25 Investor Presentation
Let’s take a closer look at the core business segment.
Express Parcel
The Express Parcel business is dominated by Amazon, Flipkart, and Meesho, which together account for about 70% of industry shipment volumes.
Story continues below this ad
Players of scale prefer to own logistics arms for the reasons mentioned above – better customer experience, lower costs, etc. As these giants in-source logistics, the market has become highly fragmented and fiercely competitive.
According to an Emkay Report, Ecom Express held a 10% market share.
Source: Emkay Research Report – Delhivery
After the acquisition is approved by the Competition Commission of India, the combined market share of Delhivery and Ecom Expresswill be around 27%, leading to a more consolidated market.
According to Delhivery CEO Sahil Barua, “The reality in the last two years has obviously been the increased insourcing by Meesho towards its Valmo platform. I think that’s now reached a fairly large percentage of their total volumes. And so, I’m not sure that that will continue to have too much impact. But I think what it has done over a period of time is that it’s essentially eroded the profit pool for the Express Parcel industry as a whole.”
This “reality” is evident in Delivery’s shipment volumes.
Story continues below this ad
Source: ICICI Direct Research – Delhivery Quarter Update – 9th Feb 2025
Despite Q3 being the festive quarter, YoY growth was 2.5%.
Based on these factors — unsustainable pricing and capital constraints — the management believes that pricing will either improve or the industry will get consolidated. If existing players, which are finding it hard to compete at current pricing, are forced to increase prices, volumes are likely to shift towards a large, integrated and lowest cost player such as Delhivery.
That would be a welcome relief for the segment that accounts for the largest revenue contribution (60% in Q3FY25).
Not only is growth in volumes and value terms uninspiring, but the EBITDA margin, which has historically been the highest for the Express Parcel segment, is declining too.
Story continues below this ad
Source: Delhivery Q3FY25 Investor Presentation
The company attributes the decline to temporary factors: elevated vehicle hiring costs during October and the launch of a new, underutilised warehouse in Bangalore.
A ‘steady state’ expectation remains 17-20% for the segment. Additionally, the acquisition with Ecom should bump up revenues by a tune of Rs 2300 crore (Ecom’s FY24 Revenue), assuming integration challenges are minimal.
It’s the second segment that is showing more promise currently.
PTL (Part Truck Load)
About a year before going public, Delhivery acquired Spoton, a B2B logistics player focused on heavier parcels that don’t fill an entire truck (hence the term Part Truck Load).
Story continues below this ad
Though integration challenges followed, the segment has performed well, growing from 10% to 18% of revenue between FY21 and FY23.
Source: Delhivery Q3FY25 Investor Presentation
Barua expects PTL margins to improve at a faster rate than Express Parcel margins due to better yields, increased network utilisation, and expansion of the reseller programme.
Source: Delhivery Q3FY25 Investor Presentation
Even as the industry experiences slower growth, Delhivery is aiming to grow its PTL business by nearly 25%-30% in the next financial year. This optimism is driven by the view that the PTL market is deeply unorganised, offering significant growth opportunities without being constrained by competitors.
On the road to profitability
In an industry marred by excessive competition, Delhivery’s strong balance sheet stands out. With over Rs 4500 crore in cash (pre-acquisition of Ecom Express for Rs 1407 crore), the company has outlined its intent to reach profitability,
Story continues below this ad
While part of the PAT improvement stems from accounting policy changes, operating cash flow came in at Rs 495 crore —up sharply from -Rs 29.6 crore in FY23.
Still, valuation remains a concern.
Source: Delhivery Q3FY25 Investor Presentation
Valuation
Even on a CFO based multiple, Delhivery trades at 37.2x. If we remove the cash, the multiple drops to 29x. It’ll be challenging to argue that this is a great buying price.
Given that cash flows only turned positive recently, there’s little historical data to benchmark against.
To become attractive for public market investors, Delhivery’s margins in the core businesses need to improve.
Story continues below this ad
A smooth integration with Ecom Express could help Delhivery’s topline and margins in its Express Parcel business. If the competitive intensity in both Express and PTL eases, Delhivery could emerge as one of the last few players standing, opening the way for public investors to enjoy the value creation they have missed so far.
Note: We have relied on data from http://www.Screener.in and http://www.tijorifinance.com throughout this article. Only in cases where the data was not available have we used an alternate, but widely used and accepted source of information.
Rahul Rao has helped conduct financial literacy programmes for over 1,50,000 investors. He has also worked at an AIF, focusing on small and mid-cap opportunities.
Disclosure: The writer or his dependents do not hold shares in the securities/stocks/bonds discussed in the article.
The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.
