Companies

Yatti Soni | Bengaluru, May 10 | Updated on: May 10, 2022

To use IPO proceeds to strengthen existing business lines, scout for M&As

Bengaluru, May 10 As Delhivery prepares to debut on the markets on May 11, the Executive Director and CBO of the logistics major, Sandeep Barasia, said the company’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) in the first nine months of FY22 is almost at breakeven. 

The adjusted EBITDA in the nine months of FY22 was at -0.7 per cent, as compared to -11.3 per cent in FY19. “We filed our DHRP first with Q1 numbers when the adjusted EBITDA was -3 per cent. For the nine months in FY22, it is almost at breakeven, which means the second and third quarters combined would actually have to be profitable on an adjusted EBITDA basis,” Barasia told BusinessLine.  

Further, the company’s revenue in the nine months of FY22 stood at ₹5,170 crore. In 2019, 83 per cent of revenue came from the B2C express parcel business and in the nine months of FY22, the B2C express accounted for 57 to 58 per cent of its total business.

Delhivery’s IPO comes at a time when most start-ups have delayed their IPO plans because of the market conditions. To this, Barasia said, “Whether we do it now, six months later or one year later, it doesn’t matter. We are building a business for the future, not just for three months or so. IPO is just one milestone in the life of the company. We are hoping that once the company is public, it will signal governance and enable us to continue to attract high quality talent. Many customers who don’t know about us, will now get to know us, which will help us get more business. Those are our reasons.”

He added that the market will value the company correctly in the long term, as it always does. Barasia believes that once investors understand their business, its growth profile, and get to know the management — they will value the business correctly. 

Delhivery is making its market debut at a price band of Rs 462-Rs 487 per share. The company will use its IPO proceeds to double down on its existing business lines, along with M&As. Expanding on these plans, CFO Amit Agarwal said the total primary issuance is ₹4,000 crore of which the company will use ₹2,000 crore to double down on its existing business lines. The majority of the investment is organic will go into hardware, automation, robotics and technology development to build capacity and grow Delhivery’s existing businesses.

Further, ₹1,000 crore will go towards inorganic initiatives. “We will buy related businesses . The second type of acquisition will be capability acquisitions. These are small teams, which have great products, great IP, but have not scaled up the product or businesses. What we will not do are VC style investments, by buying small insignificant stakes or buying stakes in unrelated businesses. That is not something we have ever done.”

Published on May 10, 2022