IPO-bound Delhivery has promising growth potential: Samco Securities

New May 10 : The Indian logistics business is poised for tremendous expansion, and the IPO-bound Delhivery, with its focus on the fast-growing e-commerce market, has promising growth potential ahead of it, said brokerage house Samco Securities.

Although the companys revenues are increasing at a rapid pace, the companys EBITDA and cash flow from operations remains negative, the brokerage said in a note.

"We expect that the company will continue to experience increasing cost pressures, at least in the short term, due to rising fuel costs," Yesha Shah, Head of Equity Research at Samco Securities, said.In addition, the issue looks to be sharply valued at a price-to-sales ratio of 5.5x of annualised FY22 revenue, when compared to its listed peers.Considering the current increasing interest rate environment, where valuations of high growth companies across the globe are taking a beating, Delhiverys expensive valuation is concerning, it said.

Therefore, the brokerage has recommended an avoid rating for the companys IPO.The companys IPO will open for subscription on Wednesday and remain open until Friday.Proceeds from the issue will fund the companys organic and inorganic growth initiatives via acquisitions and other strategies, as per reports.

The price band has been fixed at Rs 462-487.Investors can bid for a minimum of 30 equity shares and in multiples thereof.

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