InvestorQ : Why did the stock price of delivery crash so hard in the week?
shrinidhi Rajan made post

Why did the stock price of delivery crash so hard in the week?

1 month ago

I suppose you are referring to the stock Delhivery that listed in the month of May this year, almost around the same time as LIC. Against the IPO price of Rs487, Delhivery on 21st October dipped sharply to touch a level of Rs385 on the lower side and closer around these levels. In fact, Delhivery had appreciated post listing to touch a high of Rs708 before tapering lower. All that has been undone in the last 2 days with the stock correcting more than 31% in just 2 days amidst relentless selling. For instance, Delhivery fell by 15.75% on Thursday and another 18.07% on Friday, making the fall almost 31% in just 2 days.

Delhivery is now trading about 20.7% below the IPO issue price of Rs487. Let me now look at what explains this sharp sell-off in the stock and the triggers for the sharp fall. The big trigger came after Delhivery recently made a statement that it anticipated a moderate growth in shipment volumes through FY23. Not surprisingly, even Delhivery is a loss making company since in the digital logistics business model, most of the costs get front-loaded. Delhivery being in the logistics business, its model thrives on derived demand and that is obviously likely to take a hit amidst the slowdown in demand and high inflation.

Overall, the company has an impressive business model. It is India's largest and fastest growing fully-integrated logistics services provider based on FY22 revenues. The company provides supply-chain solutions to 23,613 active customers with focus predominantly on a customer base comprising of e-commerce marketplaces, digital warehouses, D2C e-tailers and MSMEs. Delhivery has said that due to higher inflation, people may be cautious about volumes of online shopping. The extended monsoon was also likely to hit business. However, one only hopes that Delhivery also does not destroy investor wealth like Paytm, Zomato, CarTrade and Policybazaar. That would be tough to swallow.