We aim to never trade below our IPO price, says Delhivery CEO Sahil Barua

We aim to never trade below our IPO price, says Delhivery CEO Sahil Barua – Mail Bonus

Bengaluru: Sahil Barua, founder and CEO of Delhivery, which will launch its public offering (IPO) for subscription on May 11, told ETtech that the transportation and supply chain company is not worried about short-term valuation as markets value companies correctly. in the long run. Barua was talking about how investors could have priced the company if it had registered last year amid the well-being of India’s ecosystems and general capital markets.

Delhivery is aiming for a $ 5 billion valuation when it debuts on the public market in the price range of Rs 462-487. IPO pricing and size were reset as macroeconomic and global sentiment deteriorated globally earlier this year, even as uncertainty continues.

Barua told ETtech that he had accepted his experienced board’s proposal for an IPO and decided to continue with it as a “large, mature and well-understood company”. Delhivery should be able to make its case float despite less than ideal conditions, he said.

“(Delhivery) has reached a stage in its development that gives us confidence … We have a mature business model. And we are on the right track to raise one billion dollars in revenue, “said Barua. He said that although Delhivery relied on technology, it was a transport company that was well understood by local investors.

According to the company, it generated operating income of Rs 5,170 million, or close to USD 700 million, in the nine months of FY22, which ended in December 2021.

Barua, who founded Delhivery more than ten years ago, along with Mohit Tandon, Bhavesh Manglani, Suraj Saharan and Kapil Bharati, said optimizing short-term valuation gains did not make sense. The valuation would have played a bigger role, he said, if the IPO had a larger bid for the sale (OFS) of shares, which is important for investors’ exit.

Also read: ETtech IPO Watch: A decade of Delhivery

“If you look at great IPOs like DMart – it’s a stock that has never traded below its IPO price.” that’s the ambition we have. We want to price it in such a way that our investors make a significant amount of money and since in the end it is very clear how the shares mix together, “said Barua, who owns 2.08% of the company and does not intend to sell any of his shares in IPO .

Delhivery was valued at $ 3 billion after a $ 277 million round of funding from Fidelity, GIC and others last May. It raised an additional $ 125 million from Lee Fixel’s former Tiger Global partner Addition in September, while another Fosun stockbroker estimated it at $ 4 billion, ETtech reported on October 4.

New-age companies such as Zomato, Nykaa, Policybazaar and Paytm made their mark on the local stock exchanges last year, but are now trading far below the highest since listing. Paytm has seen stock prices fall more than 70% from the issue price.

Barua said that one of Delhivery’s biggest strengths is that this is not an arbitrary transaction and that investors understand that such companies offer better solutions to solve transmission problems. They believe we are not trying to change user behavior, he added.

He told ET that the company has also significantly improved its profitability in recent quarters. “Growth and profitability are not opposite goals for Delhivery at this point. And the question now is to improve margins, as the operating guarantee has started to kick in in the last three quarters, “he said. Delhivery had a negative Ebitda (profit before interest, taxes, depreciation and amortization) margin of 0.57% in the first nine months of FY22 compared to -11% in FY19, he added.

Will only look at M & As in core business
Sandeep Barasia, Delhivery’s chief executive and chief business officer, said the Gurgaon – based start – up is doubling in size in India and will look at merging and merging core areas that could add value to the company.

“Either these will be companies that have helped us grow one of our stocks faster or there will be talent that we do not have in-house … What we will not do is take a minority stake, work as a financial investor or buy companies that are not core to us, “Barasia told ET.

Of the public offering of Rs 5,235 million, Rs 4,000 million will go through the main share sale, while the remainder will be through OFS of Rs 1,235 million. In OFS, current investors sell part or all of their shares to new investors and the money does not go to the company.

In OFS Delhivery, investors such as Fosun will sell Rs 200 million worth of shares, while SoftBank and Carlyle will sell Rs 365 million and Rs 454 million, respectively. Times Internet, which is part of the Times Group (BCCL), is also selling shares worth Rs 165 million in OFS.

Delhivery plans to use Rs 2,000 crore from the IPO for organic expansion and another Rs 1,000 crore for inorganic growth through acquisitions and other strategic initiatives. The rest of the profit will be for general corporate purposes, the company said.

“We have a very large (domestic) market, as I have talked about many times. We will continue to double down on the relevant market, “said Barasia.

He said that Delhivery has continued to diversify after being a company focusing on e-commerce. At FY19, 85% of its transactions came from express packages, which are primarily e-commerce, he said. “If you look at the first three months of FY22, it’s 57%. 43% of the operations are parcels that are not express deliveries. ”

Exit path IPO_Graphic_ETTECH

Even as Delhivery continues to focus on its consumer (B2C) business, Barua said the company was unlikely to be a player in fast delivery (10-20 minutes) as the business model is still evolving.

“If a 10-minute shipment is something consumers are willing to spend on cheap stuff, Delhivery will be as well placed to do it as we are today. But at the moment this is just not a focus area for us, “he added.

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