Logistics Stock Delhivery Zooms 7% Post Block Deal. More Details Inside...

Block deals by private equity firms are making headlines these days.

Last week on Friday, Highdell Investment, owned by private equity firm Warburg Pincus, sold partial stake in Kalyan Jewellers through open market transactions.

Earlier this week on Tuesday, Abrdn Investment Management sold its entire stake in HDFC AMC through multiple block deals.

Yesterday, it was Piramal Enterprises that sold its entire stake in Shriram Transport via block deal.

Last night, reports started circulating that another PE firm Carlyle is looking to sell a stake in logistics firm Delhivery.

And surely, the American PE firm today sold a 2.53% stake in the e-commerce logistics company.

But why, all of a sudden, are the PE firms looking to offload stake? Before we get to the details, let's find out more about the block deal that took place today.

Stake sale by Carlyle

Carlyle has reportedly sold a 2.53% stake in Delhivery. With this block deal, Carlyle garnered close to Rs 7.1 billion (bn).

The floor price for the shares was set at Rs 385.5 each, representing a minor 1% discount to yesterday's closing price.

With this block deal, Carlyle has now exited its entire shareholding in Delhivery. In November 2022, Carlyle had sold a 2.5% stake for a sum of Rs 6.1 bn.

Following the current block deal, shares of Delhivery were in action as they rallied over 7% in early trade to hit an 8-months high. Shares however, slipped into the red as the session progressed and fell around 1%.

Carlyle had initially invested in the logistics stock back 2017 when it wasn't listed on the bourses.

It invested in a US$ 100 million (m) funding round and later added to its investment in 2019 in a US$ 395 m round led by SoftBank.

Later in 2022, Delhivery came out with its initial public offer with a price band of Rs 487 per share at the upper end. The company had successfully raised Rs 52.5 bn via primary and secondary sale.

At the time of the IPO, Carlyle had sold 9.3 m shares for a sum of Rs 4.5 bn.

Why are PE firms looking to sell stakes all of a sudden?

We think it is a combination of the environment getting tougher for the PE firms as well as the valuations that are available in the market today.

If a lot of experts are to be believed, the era of ultra-low interest rates seems to be behind us. With interest rates likely to stay structurally higher, the PE firms need to turn more judicious with respect to the deals they enter.

Gone are the days when these firms used to fall over each other in trying to throw money at every big idea they liked. It is more about the numbers than narratives now.

Also, with the Indian stock market at record highs, a lot of the stocks are trading close to their full valuations.

Therefore, what better time to sell stakes than the current market where they are getting full bang for their buck. Besides, these firms also need liquidity just in case things turn ugly in the west.

How does the outlook for Delhivery look for the near term?

While Zomato and Paytm have showed some respite to investors by turning EBITDA positive, Delhivery has a long way to go. It barely turned EBITDA positive.

A month ago, it reported a net loss of Rs 1.6 bn for the March 2023 quarter, as compared to a loss of Rs 1.2 bn in the same quarter last year.

Revenue fell 10% to Rs 18.6 bn. Adjusted EBITDA for the quarter turned positive to Rs 60 m compared with a loss of Rs 670 m in Q3FY23.

Even the full year financials didn't have any fireworks. Revenue grew by a mere 5% to Rs 72.3 bn as compared to Rs 68.8 bn in FY22.

In the filings it made to the stock exchanges, Delhivery said it collected around 99% of its operating revenue from India while the remaining came from the rest of the world during FY23.

The company improved its margins. It improved network capacity utilisation, optimised cost of fleet operations, and improved margin quality across customer segments.

Delhivery has been under radar ever since it collaborated with Mystore, an ONDC-powered marketplace for Indian sellers, to provide express parcel shipping for rural entrepreneurs nationwide.

Mystore will leveraging Delhivery's extensive pan-India network of over 18,500 pin codes to offer affordable and reliable shipping to rural entrepreneurs. It's a win-win for both parties. Delhivery gets to add an extra revenue stream from this.

How Delhivery share price has performed recently

Since listing, Delhivery shares are down around 30%.

On a year to date basis, Delhivery share price has gained 17% while in the past one month, the stock is up 8%.

Delhivery has a 52-week high of Rs 708 and a 52-week low of Rs 291.

About Delhivery

Delhivery is an Indian logistics and supply chain company based in Gurgaon. It was founded in 2011 by Sahil Barua, Mohit Tandon, Bhavesh Manglani, Suraj Saharan, and Kapil Bharati.

It provides a full range of logistics services along with value-added services including delivery of express parcels and heavy goods, PTL freight, TL freight, warehousing, supply chain solutions, cross-border Express, freight services, and supply chain software.

To know more about the company, check out its factsheet and quarterly results.

You can also compare Delhivery with its peers:

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