All you need to know about Delhivery IPO | CA Rachana Ranade

"we will continue to invest in building scale in our existing business lines with organic investments this investments are primarily two types one is automation robotics and material handling okay in this we buy uh we we invest in parcel sortation systems back sortation systems truck loading conveyors weighing scales uh material handling equipments many such things we invest in and second thing we invested in technology"

"going inorganic in inorganic we will uh look to buy companies which are of certain size and scale and are similar in our business nature if you look at spot on logistics we bought in august 2021 it was a significantly large ppl player in the country one step ahead of uh delivery in terms of revenue size and it complemented well to you know consolidate the two businesses and gain a further skill which made us uh you know second or third largest express second largest express ptl player in the country so we will look to do certain uh uh type of acquisitions where we will buy uh you know uh profitable companies and second type of companies and an organic will be capability based acquisitions where there are small teams building on great products which our customers can benefit and we can help uh scale them extremely well"

"if you closely look at our uh rhp you will find that nearly 300 crore was a fair value loss which was a non-cash cost in our pnl almost 178 crore was the uh one-time incentive paid to the management which came back to the company by management buying more shares in the company so management double downloads taken to the company okay and nearly 216 crore is a esop cost for nine months which is a non-cash cost it is a dilution to the cap table but it's not a cash cost related to the business so if you exclude just these three items that 891 uh crore of uh patch that you see and you adjust for the depreciation you come to minus 35 crore"

"from sixteen hundred fifty crore and fi-19 we have grown the business to five hundred five thousand one hundred seventy crores in nine months of fi-22 while improving the profitability from minus eleven point three percent to minus point seven percent growing three new line of businesses the contribution of these businesses has grown from 300 crore to more than two thousand crore in just nine months"

"will it be that easy except that there will be a esop cost there see we have a very high growth company we grow somewhere between 48 to 50 55 percent uh rate and we are not a promoter-led company we are a professionally managed company to incentivize the management and and the employees and i want to highlight rashnaji that more than 600 700 people employees and delivery on stock options in the company so you effectively have 600 700 owners of the company alongside the shareholders of the company who work hard for the company right so this esop is a dilution to the cap table which is already there present we do not intend to create any new stock option pool over next five years it is already there sufficient for next five years so there is no there is no business cost of having an esop"

"the operating leverage from using automation and technology that we get on our manpower costs on our real estate that we lease and our vehicles that we operate more efficiently this is what leads to improvement in adjusted ebitda which is the true ebitda of the company on a business level from minus eleven point three percent to minus point seven percent and our objective is to continue to improve this uh adjusted ebitda the second place of of using the cash flows for the company is in investments that it make for its capacity expansion as you saw we uh as i told you earlier we make investments in automation and uh building scale in our facilities a good way to look at it ratings would be what is the capex we did as a percentage of revenue three years ago and what what do we do it today was almost ten percent three years ago and it has now come down to about seven and a half uh odd percent uh in f5 twenty two seven and a half eight percent and as the business scales further and further and achieves a higher utilization level you would expect this to move in the same direction"

"now in our b2b business almost all of our business is protected by diesel price hike losses so when the fuel price goes up we increase the rate uh you know a charge to our customers by a certain sensitivity which is or a certain salience that's already agreed and when the price goes down we adjust it automatically downward and same thing happens on the cost side in our b2c business which is express parcel business we have fair bit of contracts where we do have diesel price height protection but the interesting thing rich energy is that between fi 19 and fi 22 diesel price has gone up from 65 rupees to 100 rupees nearly yeah yeah yeah and our charge to our customers we have bought it down from 92 rupees of parcel to 72 rupees a parcel so that is the extent of operating leverage we have driven in our operations and shared efficiencies back with our customers"

"delivery is the only company in the country which has 43 46 feet tractor trailer to the extent of you know 60 200 or trucks that we currently have in our network and we have done an enterprise agreement with volvo to uh many more trucks or our partners will buy these trucks for for us these trucks are far more fuel efficient on a per kg per kilometer basis than the standard 24 20 32 feet trucks that you have we have a relative advantage versus our our other service providers because our diesel cost on per kg per kilometer basis is lower"

"we talked about fuel there is another very important aspect in inflation which is wage inflation the general inflation in the market is going up the wage inflation will also go up yeah so we have i talked about automation that we are investing in okay you would have seen in during diwali period lot of logistics companies posting 30 000 jobs 40 000 new jobs being required delivery is not required to do that because we are invested in automation to the extent that our dependence on manpower is much lower and hence the expense of the manpower in our cost structure is lower"

"first thing to calculate the ev by sales uh uh the right thing for one to do would be to adjust it for cash because we have we will have far more cash than any of our competitors or maybe even all our competitors put together we will nearly have somewhere around 800 to 900 million dollars in cash in bank as most logistic companies will have much much lower substantially lower cash so when you just for it our uh ev by sales multiple will be uh about 4.5 or 4.6 for a annualized period of fy 222."

"amazon was one tenth the size of uh walmart ten years ago okay and i had no profit on its p l and uh walmart had five six percent profit today ten years later uh what amazon has grown 10x from that point and walmart has grown maybe 40 50 from where they were earlier and during the same period walmart uh amazon's profit has grown to five to six percent while uh walmart margins are lower than that of amazon and this has now reflects in their valuation and share prices as well"

"richard when delivery started the founders of delivery wanted to take this company public in 10 years so we are one year late see there are uh two three things uh one is that we as management team our building expertise have built expertise and will continue to build stronger expertise in uh building a supply chain and logistics business not in predicting what is a great time or a bad time in a market now we understand what the market sentiment is but we also understand what our customers want to delivery works with nearly all businesses we think of which commonly comes across our mind and once we are a public company majority or all our customers will be very very comfortable and very peaceful about the compliances disclosures corporate governance of our company"

"what is unique about our business is that we first of all uh operate a common interoperable infrastructure and technology across all our business lines when you think of any logistics company in india uh you will think they're they're mono lines they are either a express partner clothes company either they are a parcel logistics company or they are a full truckload company or they are just focused on cross border or they maybe have a special product such as air nobody offers an integrated services spanning across all type of services using both air and ground shipping at a scale delivery desk okay now why this is important there are multiple reasons for it one is that the requirements of customers have become very sophisticated for two three reasons one is that with online commerce growing the competition between online and offline has increased and offline started creating newer customer experience new you know more frequent inventory replenishment customer in general become more demanding people are now getting food in 10 minutes so you can understand here yeah then the uh then the second aspect in this is gst earlier businesses were required to have multiple warehouses across the country 27 30 warehouses across the country now they and they used to optimize for tax now they need to optimize for supply chain cost inventory carrying cost all right so that that is why the need of the businesses has have evolved very rapidly in last 10 years okay and that is what we deliver using a common interoperable infrastructure and technology to our customers where customers can plug into n number of services or all the services at the same time and this is the reason why we have more than 58 of our revenue coming from customers who use two or more services of us"

"now this has a superior advantage for us in unit economics or scale because when we offer all the services okay and we are number one in e-commerce parcel we are number two in express ptl we are one of the largest in supply chain services the combined scale of it is far larger than anybody has in their monoline business ability to reduce the cost with the scale improving scale is far superior"