Delhivery IPO: GMP, subscription status, other details. Should you subscribe or skip?

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Supply chain company Delhivery on Tuesday raised 2,347 crore from anchor investors, ahead of its initial public offering (IPO) which opens for public subscription today and will conclude on May 13.

The company has set a price band of 462-487 a share for its 5,235-crore initial share sale.

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As of 11:55 am on day 1, Delhivery IPO has been subscribed 0.04x with retail category booked 0.20 times, employees 0.02x whereas NIIs and QIBs are yet to bid, BSE data showed.

The size of the IPO has been cut to 5,235 crore from 7,460 crore planned earlier.

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The public issue now comprises fresh issuance of equity shares worth 4,000 crore and an Offer for Sale (OFS) component of 1,235 crore by existing shareholders.

Under the OFS, investors Carlyle Group and SoftBank as well as Delhivery’s co-founders will divest their shareholding in the logistics company.

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As per market observers, Delhivery shares’ premium (GMP) are flat at 7 in the grey market today. Shares of the company are expected to list on stock exchanges BSE and NSE on Tuesday, May 24, 2022.

“We recommend Subscribe rating from a long term perspective given it being largest and fastest growing 3PL express parcel delivery player, having unified infrastructure network, vast amount of data intelligence and R&D, experienced professional management team and strong relationship with diversified customer base,” said Yes Securities.

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The brokerage believes Delhivery’s asset light business model and its cutting‐edge engineering and automation capabilities along with its new age technologies will help company leverage its operating efficiencies and improve the profitability in the coming years.

Proceeds of the fresh issue will be used towards funding organic growth initiatives, funding inorganic growth through acquisitions and other strategic initiatives and for general corporate purposes.

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“Delhivery is loss making, which makes it difficult to value based on earnings; other listed competitors are profit making with PBT margins ranging from 1.3% to 15.7%.

Delhivery has the advantages of scale and a flexible business model driven by technology, which need to be tested in a price-sensitive Indian market.

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There will be a tradeoff between growth and profitability for the company going ahead, and investors can wait for a better entry point to invest in the company,” said PhillipCapital in a note.

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