Delhivery IPO sees tepid subscription on final day amid wider market sell-off

Visual from Delhivery website

The initial public offering of logistics platform Delhivery was subscribed 1.63 times on its third day, lower than what the Indian fintech company Paytm saw on its final day of subscription that registered its name in one of the worst performing IPOs in the history of Indian stock market.

Delhivery’s IPO coincided with a sharp selloff in the secondary market. The benchmark Nifty has dropped nearly 8% this month.

“We have recommended avoiding, basis valuation and loss-making history. Besides, the performance of the recent IPOs with loss-making history is a cause of concern. Investors should wait for meaningful revival.”- said Ajit Mishra, VP-Research, Religare Broking Ltd

“We have recommended avoiding, basis valuation and loss-making history. Besides, the performance of the recent IPOs with loss-making history is a cause of concern. Investors should wait for meaningful revival,” said Ajit Mishra, VP-Research, Religare Broking Ltd.

It also comes at a time when global IPO activity has slowed down as the Russian invasion of Ukraine and rising interest rates spurred market volatility. After a spectacular run in 2021, India’s primary market has also been off to a slow start this year, with only three companies— Adani Wilmar Ltd, Vedant Fashions Ltd and AGS Transact Technologies Ltd — raising ₹7,819 crore ($1.08 billion) through IPOs so far, according to data from primary market tracker Prime Database. In comparison, there were 10 IPOs in the first two-and-a-half months of last year.

Going by the grey market premium, the much-awaited LIC issue is also expected to list at a discount due to a lukewarm response from foreign investors.

However, Delhivery’s investors could breathe a sigh of relief as its IPO has just about managed to sail through on the final day of the bidding process, despite garnering a tepid response from high net worth individuals (HNIs) and retail investors. While Delhivery launched its IPO to raise a whopping Rs 5,235 crore on May 11, it got bids for 101.6 million shares against 62.5 million on offer on its final day, a process that was dominated by institutional investors.

According to data from BSE, investors bid for 10,16,91,480 equity shares or 1.63 times the 6,25,41,023 equity shares offered in the IPO. The portion for retail bidders was subscribed 57%, whereas institutional investors attracted 2.66 times bids. The employee quota saw only 27% bids. The portion reserved for HNI investors was subscribed to 30%. and the company had reserved a 75% subscription from institutional investors.

Following Paytm’s disastrous IPO last year, which was expected to clean house on its listing, investors have been spooked. The company was subscribed 1.89 times and is down 76% from its issue price of Rs 2,150 per share.

Almost 10 companies, besides LIC, are looking to raise around Rs 12,000 crore through IPOs this month, according to a report by The Economic Times. These include Delhivery, eMudhra, Prudent Corporate Advisory Services, Paradeep Phosphate, Syrma SGS Technologies, Aether Industries, JK Files, Ethos, Hexagon Nutrition and Venus Pipes & Tubes, the report added. With LIC’s IPO, the total funds raised could reach Rs 28,960 crore, making May 2022 the best month for IPO fund-raising after November 2021.

Delhivery competes with DHL’s unit Blue Dart Express and DTDC India in a sector that had a direct spend of $216 billion in fiscal 2020 and is expected to grow to $365 billion by fiscal 2026. It provides a wide range of logistics services, including delivery of express parcel and heavy goods, PTL freight, TL freight, warehousing, supply-chain solutions, cross-border express, freight services and supply-chain software.

Founded in 2011, Delhivery handles more than 1.5 million packages a day through its 43,000-strong team across India, according to its website. It became a unicorn in 2019 when it raised $413 million in a Series F round led by SoftBank Vision Fund and completed a series H funding round in June led by Fidelity.

The logistics player reported a net loss of Rs 891.13 crore with revenues of Rs 4,911.4 crore for the period ended December 31, 2021.

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