Logistics and supply chain company, Delhivery witnessed a last-minute flood of demands from qualified institutional buyers that pushed through its ₹5,235 crore IPO on the final day. Delhivery IPO has shown a tepid response till the second day of the public offering, however, by the third day – the issue made a narrow escape and fully subscribed.
Data given on exchanges showed that Delhivery IPO received cumulative bids of about 101.6 million shares against the offered size of 62 million – fully subscribing by 1.6 times.
Despite extreme volatile markets condition, the IPO received massive demand from qualified institutional buyers (QIB) as the category got oversubscribed by 2.6 times on the third day.
QIBs category includes foreign institutional investors, domestic financial institutions (banks, financial institutions, insurance companies), mutual funds, and others.
However, unlike QIBs, the reserved portion for retail individuals, non-institutional investors, and employees stayed under-subscribed even during the last day of the bidding with subscriptions of merely 57%, 30%, and 27%.
On Day 2, the IPO received a subscription of just 23% against the total offered size. On this day, the quota for retail individual investors (RIIs) subscribed by 40%, while QIBs got 29% subscriptions and non-institutional investors subscribed by 1%.
Delhivery IPO opened from May 11 to May 13 for public subscription. The IPO size of ₹5,235 crore – included a fresh issue of ₹4,000 crore and an offer for sale up to ₹1,235 crore carried by shareholders.
Of the total size, 75% of the portion was allocated to QIBs, while 15% was set for non-institutional and 10% for retail investors.
For the IPO, the price band was fixed at ₹462 per equity share at the lower end and ₹487 per equity share at the upper end. There was an employee discount of ₹25 offered on the issue as well.
Bharat Chhoda and Harshal Mehta, Research analysts at ICICI Direct in its IPO note for the company said, Delhivery has shown strong growth and built a recognizable brand in a segment marred by intense competition and low barriers to entry. With a pan-India presence and diversification into other segments (LTL, omnichannel etc), the management seeks to utilize the scale to further optimise, crossutilise its network and lower costs. However, we await further progression on path of achievement of positive cash flows.
The duo highlighted key risks and concerns for the company. These are:
1. The company’s asset light business is significantly reliant on asset partners and any inefficiency or disruption with asset partners can impact the operations and brand image of the company.
2. The company continues to incur operating losses.
3. The company has acquired assets (Aramex, Fedex, Primaseller, etc) and companies (Spot-on) as a part of its growth strategy. Failing to integrate newer acquisitions may impact profitability.
However, it also needs to be noted that Delhivery IPO hit the market during a time when indices witnessed overselling as fears over inflationary pressures and interest rate hikes going forward hampered sentiments. Also, a possibility of recession daggered like bears through the markets.
On this week’s trading session, Vinod Nair, Head of Research at Geojit Financial Services said, “Lingering concerns over the weakening rupee, global interest rate hikes, elevated inflation numbers, and lockdowns in China kept the markets on the edge this week.”