Delhivery IPO size cut down by a third due to market volatility and LIC IPO, say analysts

• Logistics and supply chain company Delhivery is all set to go for an IPO next week in order to raise ₹5,235 crore.
• The company had initially planned to raise ₹7,460 crore, but decided to reduce the issue size by a third.
• The company now plans to raise ₹4,000 crore through fresh issue and ₹1,235 crore as an offer for sale (OfS).

Logistics and supply chain company Delhivery is all set to go for an initial public offering (IPO) next week to raise ₹5,235 crore. The company had initially planned to raise ₹7,460 crore, but decided to reduce the issue size by a third.

The cut in the public issue comes amid volatile equity market conditions and the ongoing Life Insurance Corporation (LIC) IPO, which is the biggest public issue in the country.

Delhivery, in its press conference held on May 5, noted that existing shareholders in the company believed the valuation was attractive and wanted to be a part of the company for a bit longer. Meanwhile, the company realized that it only needed ₹4,000 crore in order to fund its acquisitions and expansion plans.

However, experts believe there was no other way around this.

Yash Gupta, equity research analyst at AngelOne, told Business Insider that Delhivery and its shareholders made the right call as the ongoing ₹21,000 crore LIC IPO would eat into the liquidity of the investors.

Besides, it would also increase the cash reserve ratio (CRR) required by the Reserve Bank of India (RBI), the central bank of India.

“It will be difficult to predict the scenarios [if Delhivery went ahead with ₹7,460 crore IPO] but as the IPO size increases we have seen that it becomes difficult for the companies to get subscriptions and liquidity in the market will be more after listing. So we believe that it is a good decision by the company to decrease the overall issue size,” Gupta added.

The company now plans to raise ₹4,000 crore through fresh issue and ₹1,235 crore as an offer for sale (OFS). The capital raised in a fresh issue is directly raised by the company, whereas the amount raised by offer for sale (OFS) goes to the shareholders selling their shares in the company. In this case, the OFS would go to Carlyle, Japanese Softbank, Fosun group-owned China Momentum Fund and Times Internet.

Kotak Mahindra Capital’s whole-time director V Jayasankar, on behalf of Delhivery, noted that the persistent volatility in global financial markets has made the current market situation challenging, but Delhivery’s IPO will sail through as it has been “attractively priced”.

“There have been only three tech IPOs and the fact that Delhivery is growing and doing a very large solid million dollar transaction is a testimony to the quality of the company that’s been built. You will very shortly see on the tenth of May when the anchor investor book closes,” he said.

“The breadth and the depth of participation both from foreign institutional investors as well as domestic institutional investors And that is to put into context what is the market environment or ecosystem that we see,” Jayasankar explained further.

Kotak Mahindra Capital, Morgan Stanley India, Bofa Securities India, and Citigroup Global Markets are managing the share sale.

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