DELHIVERY - Delhivery Limited Share Price

In the Q1 FY26 earnings call held on August 1, 2025, management of Delhivery Limited provided a positive outlook, highlighting strong revenue growth and improved profitability across core transportation businesses. Key financial highlights included revenue from services of Rs. 2,294 crores, a 6% increase year-on-year and 5% quarter-on-quarter. EBITDA margins rose to Rs. 149 crores or 6.5%, up from Rs. 97 crores a year prior, denoting a 200 basis points YoY expansion. Profit After Tax (PAT) stood at Rs. 91 crores, reflecting an increase of 140 basis points from Rs. 54 crores in Q1 FY25 and a 70 basis points rise from Rs. 73 crores in Q4 FY25.

Management emphasized significant growth in the Express Parcel business, achieving 208 million shipments, a rise of 14% YoY and 17% QoQ. They noted that the full effects of the recently acquired Ecom Express would begin to show in Q2 FY26. Aiming for continued expansion, the management anticipates the Express Parcel margins to remain within the 16-18% range, with further improvements expected as volumes rise. They expressed confidence in retaining over 55% of Ecom's volumes, which they expect will further boost profitability.

Forward-looking points included a belief that margins will keep increasing without adverse pricing movements, leading to a PAT margin expansion continuing throughout the fiscal year. The business continues to focus on enhancing operational efficiencies while exploring new initiatives such as Rapid Commerce and Delhivery Direct services. Management also conveyed that the integration of Ecom Express would be smooth, with no requirement for additional overheads. The infrastructure is poised to support an anticipated uptick in volumes, signifying strong growth prospects for Delhivery in the upcoming quarters.

Question 1: "Express Parcel volumes have increased this quarter, but we did see the yield coming down. So is there a way to look at it that the incremental shipments which have come, have come largely at a lower yield or there's something else which is going out here?"

Answer 1: The decline in yield is primarily due to a reduction in the average weight per parcel, driven by growth in small parcels. This isn't a pricing issue; it's a natural result of changing volume mix. Historically, yields tend to rise during peak seasons when heavier packages dominate. Moving forward, we don't foresee further yield compression as Ecom Express has stabilized pricing in our favor.

Question 2: "After your Ecom Express consolidation, what impact should we see on the overall volumes of Delhivery? Are there incremental volumes which could be moved in Q2? If any, could you help us quantify or understand what range that could be?"

Answer 2: We anticipate a significant impact from Ecom Express's consolidation starting in Q2. Most volumes from Ecom began flowing to Delhivery only towards the end of Q1. Therefore, you should expect to see a notable volume increase in the range of 30-40% growth based on the trend we're observing in July, compared to the 208 million shipments recorded in Q1.

Question 3: "What could be the impact on yields and margins from current levels after the Ecom Express consolidation?"

Answer 3: We expect that margins will actually expand rather than decline with the Ecom Express volumes coming in. The mix of clients will influence yield each quarter, but overall, we believe margins will move steadily within our guided range of 16-18% as we capitalize on economies of scale and improve operational efficiency.

Question 4: "Quick Commerce has created a material opportunity for our PTL division. Could you quantify the upside opportunity out here?"

Answer 4: Quick Commerce presents a unique opportunity by requiring delivery to dark stores and mother warehouses. This involves navigating complex logistics, which is where Delhivery excels. Although it's hard to quantify precisely, we believe that as this sector grows, our capabilities in managing these logistics will lead to a significant increase in B2B consignments, bolstering our PTL division's growth.

Question 5: "Since the acquisition of Ecom Express, are you seeing any change in terms of competitive intensity? Has the irrational pricing discipline improved?"

Answer 5: We've observed a reduction in price competition since acquiring Ecom. While we can't take sole credit for this market shift, the financial pressures on many 3PLs have imposed a more disciplined pricing framework. Our contracts post-acquisition are based on our pricing terms, which indicates that irrational pricing is becoming less common in our operational landscape.

Question 6: "What guidance can you provide regarding the volumes of Ecom Express that you've retained, specifically in comparison to your original estimates?"

Answer 6: Initially, we estimated retaining 30% of Ecom's volumes. However, we are currently retaining around 55-65%, which is higher than anticipated, driven largely by operational challenges that other players are facing. This retention reflects our superior quality and service reliability during a difficult quarter for logistics overall.

Question 7: "Can you elaborate on the impact of your supply chain services and the projected revenue for the next few years?"

Answer 7: Our confidence in sustaining growth for Supply Chain services is based on a solid pipeline where we're set to hit Rs. 1,800-2,000 crore in revenue by FY29. We've refined our pricing strategies and exited unprofitable areas, allowing us to focus on high-potential sectors. The pipeline looks robust, with about Rs. 300 crore in supply chain mandates currently under negotiation.

Question 8: "What have been the recurring costs associated with the Ecom Express acquisition?"

Answer 8: The integration costs are capped at approximately Rs. 300 crores, mainly attributed to personnel and some winding down of fixed contracts. Beyond that, we do not expect any recurring costs arising from added volumes, as they will mostly flow through the existing Delhivery infrastructure without significant overhead expansion.

Question 9: "Can you provide clarity on the relationship with major clients like Meesho regarding their insourcing strategy?"

Answer 9: Meesho appears to have stabilized its insourcing strategy. They continue to outsource a significant portion of their volumes, and we are capturing a larger share of that, indicating strong demand for our reliable services. Overall, we believe this trend is likely to persist as the market values quality delivery.

Question 10: "What are the expected margins for your businesses, especially concerning the Ecom Express integration?"

Answer 10: We anticipate maintaining service EBITDA margins of 16% to 18% post-Ecom integration. Given our current operational efficiency and market conditions, incremental volumes from Ecom should lead to higher margins, with no need to incur additional overhead costs for servicing these volumes.