Delhivery downgraded due to volatility and Meesho’s shift to in-house logistics.
Delhivery has been downgraded by a brokerage firm, citing the company’s volatility and management instability. The downgrade follows reports that Meesho, Delhivery’s largest customer in the third-party logistics (3PL) sector, is transitioning its deliveries to an in-house system named Valmo, which could significantly impact Delhivery’s shipment volumes.
Bernstein analysts highlighted several challenges facing Delhivery, including struggles with the partial truckload (PTL) business, integration issues with Spoton, and a weakening e-commerce segment due to factors such as Shopee’s exit and peak season execution problems. The recent shift by Meesho to insource logistics, alongside senior management departures, exacerbates these issues. “Delhivery is a volatile company… This, coupled with senior management exits, suggests that the ship is still unstable,” the analysts noted.
Delhivery reported a net loss of INR 68.5 crore in the March quarter, reversing a surprise profit from the December quarter. Despite this, the company saw a 12 percent increase in revenue from operations year-over-year, reaching INR 2,076 crore.
Valmo, Meesho’s in-house logistics system, currently handles 20 percent of its total volumes, with plans to increase this to 40 percent in the near future. Valmo has a reach of 5,000 pin codes and claims its cost per parcel is about 5 percent lower than that of traditional 3PL services, with expectations of further savings of 5-7 percent over the next 12-18 months. Meesho emphasises that Valmo aims to modularize the delivery network, allowing multiple players to participate.
Bernstein analysts pointed out that Meesho’s low average order value (AOV) platform necessitates low logistics costs, achievable by increasing parcel volumes through its network. They predict that Meesho might extend Valmo’s reach beyond 40 percent, similar to global platforms like Shopee, MELI, and Coupang, which favor in-house logistics for the majority of their volumes.
While Valmo’s cost advantages currently stem from its concentration in urban areas, the true benefits will become clearer as it expands into Tier 2 and smaller towns. Meanwhile, Delhivery’s growth in e-commerce volumes is expected to remain volatile.
