DELHIVERY - Delhivery Limited Share Price

Management's outlook for Delhivery is optimistic, highlighting a quarter of significant growth and operational success. For Q2 FY26, the company's revenue from services reached approximately Rs.2,546 crores, reflecting a substantial 16% year-over-year growth and an 11% sequential increase. EBITDA for the quarter stood at Rs.150 crores, translating to a margin of 5.9%, a notable increase from Rs.57 crores during the same quarter last year.

Key performance indicators include a 32% year-on-year growth in express parcel shipments, totaling 246 million shipments, and profitability, with a PAT of Rs.59 crores, marking a significant rise from Rs.10 crores last year. Cash reserves are healthy at Rs.4,200 crores, providing a strong foundation for future growth.

Management also outlined expectations for the integration costs related to the Ecom Express acquisition, which should total around Rs.300 crores. So far, Rs.90 crores have been accounted for in Q2, with an expectation of remaining costs distributed without exceeding the original estimate.

The outlook for express parcel service EBITDA margins remains positive, projected between 16% and 18% by the end of 2026, driven by volume growth and the reduced necessity to pass on cost reductions to customers due to improved competitive positioning. Management emphasizes that they remain on track to achieve these targets without solely relying on market growth, which is anticipated to range between 15% to 20%.

In terms of strategic initiatives, Delhivery is investing in rapid commerce and on-demand intercity services, with an investment of Rs.15 crores planned for these new ventures. Overall, management believes they are well-positioned for sustained growth, profitability, and successful integration of recent acquisitions, setting a strong tone heading into Q3 and beyond.

Here are the summarized questions and answers from the Q&A section of the earnings call transcript:

1. Question: Can you elaborate on express parcel margins? Answer: Our normative margins in the express business remain 16% to 18%. With the Ecom Express acquisition, we expect incremental margins to potentially exceed 18%. However, Q2 margins remained constrained due to some shifted volumes and initial September costs. Over the next 24 months, with ongoing growth, we anticipate improving margins, likely reaching the 18% range and possibly beyond as we gain volume scale.

2. Question: Could you clarify the Rs. 300 crore integration cost envelope? Answer: The Rs. 300 crores was based on our initial assessments of real estate and integration needs. We've incurred Rs. 90 crores this quarter and expect about Rs. 100-110 crores more over the next two quarters. We now believe total integration costs will be lower than anticipated due to faster than expected consolidation of Ecom's network.

3. Question: What has driven the increase in supply chain margins from 7.2% to 12.8%? Answer: This improvement is structural, resulting from significant operational process enhancements and technology use. We prioritized profitability over growth, allowing us to invest in efficiency that has led to gear improvements in our supply chain services, boosting margins significantly over last year and optimizing performance.

4. Question: Is there an increase in demand post-GST cuts? Answer: Yes, we noted some positive impact on consumer demand due to GST cuts, especially in sectors like consumer durables during the festive period. However, the impact varies, with a notable uptick in certain categories amid overall increased volumes.

5. Question: What is the expected market growth rate for express parcel beyond this year? Answer: We expect the express market to grow at a rate of 15-20%. Delhivery aims to outpace that due to our improved cost structure and the reduced competitive intensity from acquisitions, allowing us to gain market share beyond general industry growth.

6. Question: What about PTL growth targets? Answer: Despite H1 achieving around 15% growth impacted by GST shifts, we anticipate returning to about 20% growth for the year, especially as the January-March period traditionally sees a surge in shipments. Our focus remains on improving yield while achieving that volume growth.

7. Question: How should we interpret current express parcel volume versus peak volumes? Answer: The daily average may seem lower due to fluctuations in shipment volume on different weekdays. High volumes are typical on Mondays while lower on weekends, making the network's capacity planning efficient without significant slack impacting profitability or costs.

8. Question: How does the market share look after acquiring Ecom Express? Answer: Our market share has increased from about 20% to around 27-30% following the Ecom acquisition. When excluding certain self-logistics competitors, our share could be over half the market, indicating strong growth and retention in our network.

9. Question: Is additional rent currently affecting your costs due to facilities from Ecom? Answer: Yes, we continue to incur some rent due to lock-in contracts; we expect most facilities to exit by the end of this financial year, alleviating this cost in future quarters.

This summary encapsulates key questions and responses while complying with your request for detail.