Analyst Concall
Delhivery to launch rapid delivery services in Bengaluru
This story was originally published at 23:04 IST on 14 November 2024
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--Delhivery: Aiming to increase market share in logistics going forward
--CONTEXT: Delhivery mgmt comments in post-earnings analyst call
--Delhivery: Will launch third party product for e-commerce
--Delhivery: Volumes grew 30% on year in October
--Delhivery: Expect consumption slowdown to impact customer e-comm purchases
--Delhivery: Aim to up mkt shr in delivery even if e-comm space stays muted
--Delhivery: See FY25 capex near 6.7% of sales, FY26 below 6% of revenue
--Delhivery: Partial truckload margin will go up as overall volume grows
--Delhivery: Will continue to invest in partial-truckload segment
--Delhivery: Co looks up to Safexpress in part-truckload segment
--Delhivery: Cargo claim ratio has reduced significantly
--Delhivery: Piloting third party rapid delivery product in Bengaluru
--Delhivery: Will also launch product to increase delivery speed
By Aman Aryan
MUMBAI – While Delhivery Ltd. does not plan to play in the 15-20 minute delivery market, the company plans to launch third party rapid delivery services, the company's management said in a post-earnings conference call Thursday. The company is piloting a third party intracity rapid delivery product for Bengaluru, the management said, as the city is "the mecca of quick commerce in some senses". Besides a rapid delivery product, the company also plans to increase its speed of delivery by expanding its air express product by a small degree by using prime flights.
The faster delivery of products for both regional surface shipping and national air shipping will lead to incremental volume, the management said. The company plans to open third party warehouses which will be powered by the company's warehouse management system to provide real-time visibility of its inventory and locations. This will help point out stock-keeping units which are available for rapid commerce delivery. These third party warehouses will first be launched in Bengaluru, followed by the National Capital Region. The management said the size of the warehouses will be in the range of 2,500-5,000 square feet.
The company also plans to launch a third-party shared e-commerce network for e-commerce brands. These networks will also drive its volume growth in major cities, the management said. The logistics and supply chain company said it will continue to increase its share in the e-commerce space, even if the market remains sluggish. The management said the softness of consumption had affected the e-commerce industry.
On reducing the distance travelled by parcels, the management said it largely gets influenced by the supply and demand. E-commerce companies will not be reducing the distance as it is demand which influences it. However, the management said, "The distance travelled per parcel will reduce anyway" over the long-term.
With the proposed rapid delivery services, the company expects to benefit from incremental market share, the management said. While the growth was slower in the seasonally weak September quarter, the company sees a positive sign for Oct-Dec. The company said it has already recorded a 30% growth in its shipment closures in October and expects a good performance in November as well, due to some spillover effect.
For Apr-Sept, the capital expenditure was about 6.6% of the company's revenue, the management said. Delhivery is ahead on the plan to reduce the capital expenditure intensity of its business, the management said, and added that it expects the capital expenditure for 2024-25 (Apr-Mar) to be near 6.7% of the revenue and for FY26 to be lower than 6% of the revenue. The company plans to reduce its capital expenditure on tractor-trailers to 1.0-1.1% from the current 2.0-2.1%.
While the company said the partial truckload business is highly unorganised with very few organised players in the space, the company said it looks up to Safexpress in India in the partial truckload space. "Our first ambition as delivery is at the bare minimum to be able to do what Safexpress does," the management said. However, it said that Delhivery differs from Safexpress on operational and infrastructural basis.
The company said it will continue to invest in its partial truckload segment as it expects the business' margins to mirror that of its express parcel segment as the partial truckload business will mature. Delhivery's partial truckload segment's margin rose to 2.9% in the September quarter from a negative margin of 4.9% in the year-ago quarter. The management expects this margin to further rise to a range of 16%-17% with an increase in its overall volume. The company said the cargo claims have also reduced consistently after it peaked two years ago.
Delhivery Thursday reported a consolidated net profit of INR 102.04 million for the September quarter on consolidated revenues of INR 21.90 billion. On the National Stock Exchange, shares of the company closed at INR 330.55, up 0.1%. End
Edited by Akul Nishant Akhoury
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