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Delhivery IPO subscribed 21% on Day 1 of offering

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The issue witnessed a muted response from investors across all categories as hefty valuations and negative cash flows have made investors cautious.

Logistics firm Delhivery’s 5,235-crore initial public offer (IPO) was subscribed only 21% on Wednesday. The issue witnessed a muted response from investors across all categories as hefty valuations and negative cash flows have made investors cautious. Additionally, the recent rout in stock prices of new-age tech companies further weighed on investors. The issue, open for subscription till Friday, garnered bids for only 13.2 million shares on Wednesday against 62.5 million shares on offer. The portion set aside for qualified institutional buyers was subscribed 29% on Day One, retail was subscribed 30%, whereas the quota for non-institutional investors and employees was subscribed only 1% and 6%, respectively. The logistics firm has reserved shares worth20 crore for employees and they will further get an additional discount of 25 from the offer price. The price band of the issue for other investors is set at462-487 per equity share.

A day prior to the IPO, Delhivery raised 2,347 crore from anchor investors at the upper end of the price band. AIA Singapore, Tiger Global Investments Fund, and Societe Generale were among the top foreign investors to participate in the anchor book. Among domestic mutual funds, SBI MF, HDFC MF, ICICI Prudential MF, Mirae MF, and Nippon India MF took part in the anchor round. Of the total issue size of5,235 crore, 1,235 crore is an offer-for-sale (OFS) by existing shareholders like Carlyle and Softbank. The company, however, reduced its IPO size by nearly 30% amid uncertainty in the equity markets due to geopolitical crisis, rate hike scenario, and foreign fund outflows. It had earlier planned to raise as much as7,460 crore through the IPO.

According to brokerages, the company’s negative cash flows and expensive valuations are the key risks. “Delhivery targets higher volume growth by providing its customers with competitively priced service offerings. The company may continue to experience limited profit margins on its service offerings, which may contribute to losses and negative cash flow,” said ICICI Direct in a note. The firm, however, is the largest and fastest-growing fully integrated logistics service player in India by revenue as of fiscal 2021.

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