Friday, April 19, 2024
Outlook India
Outlook Business

Spoton integration, Shopee exit drag down Delhivery's profit in Q1 2022

Inflation and rising freight costs are other reasons why the logistics start-up posted a Rs 399.3 crore net loss for the April-June 2022 quarter

Spoton integration, Shopee exit drag down Delhivery's profit in Q1 2022
POSTED ON August 10, 2022 8:09 PM

Softbank-backed logistics company, Delivery posted a net loss of Rs 399.3 crore for the quarter June 30, 2022. This is almost three times the Rs 129.6 crore net loss it posted in Q1 2021. The start-up, which went public in May this year, attributed this to several factors. 

Key amongst this was spiralling freight costs due to disruption of supply chains and rising fuel costs. The Federation of Indian Export Organisations pegged India's merchandise exports in the current fiscal year at $475 billion, 14 per cent higher than the previous financial year but much less than the growth seen in FY22 over FY21.

Delhivery stated that its freight costs had risen by 67 per cent to touch Rs 1,452 crore in its regulatory filing to the BSE. This also had a bearing on its adjusted EBITDA loss, which stood at Rs 217 crore for the June 2022 quarter against Rs 58 crore for the same period a year ago. 

Talking about this Abhik Mitra, Chief Customer Experience Officer at Delhivery and CEO of Spoton said, "Our EBITDA margins were temporarily affected through the integration phase with Spoton as a result of inherent seasonality in the partial truckload (PTL) business, slightly slower than planned phasing of customer restarts and retention of capacity to maintain service quality and in anticipation of H2 volumes."

Delivery acquired Spoton, a partial truckload business, in March this year. Merging its systems with this new acquisition saw its revenue from the B2B sector drop by 46 per cent. It also acquired California-based Transition Robotics in December 2021.

Moreover, Singapore-based e-commerce company Shopee exited its Indian business six months after setting up operations in the country. It resulted in the creation of excess capacity in the logistics company's operations, which it had scaled to keep pace with rising ecommerce business. In an investor presentation, it claimed that this under-utilisation resulted in additional Rs 150 crore costs.

Sahil Barua, co-founder and CEO of Delhivery, mentioned, "We are an exceptionally high incremental margin firm. Therefore, it is not unusual to witness a decline in the partial truckload business producing that level of under-utilisation when volumes decrease sharply."

Inflation also became a bane for the company , which had 29,282 active customers for the June 2022 quarter, up from 23,613 in the 2021-22 fiscal year. As energy prices rose, taking inflation up with it, the road transport sector, which has low profit margins, was especially impacted.  

A Silver Lining

However, not all was bad news for the newly listed start-up. Its June 2022 quarter revenue stood at Rs 1,745.7 crore, a 32.5 per cent rise over the same quarter last year. However, this was a 16 per cent decline from Rs 2,071 crore in the previous quarter. 

This could be attributed to the slowing of e-commerce sales during the three months. Delhivery's growth is primarily propelled by the e-commerce sector, though it is now expanding its base in other domains. 

"We continue to see strong demand for our integrated supply chain solutions across industry verticals, including auto, industrial goods, chemicals and consumer durables," said Sandeep Barasia, Chief Business Officer and Executive Director, Delhivery.

Barua maintained that the company is "extremely well-capitalised" with cash and investments of over Rs 6,000 crore as of June 30. He added that it would invest in building infrastructure, technology and operational capacity to deliver high-quality service to its customers.

  • Related Articles

    Besides classifying digital lenders into three categories, the guidelines specify how financial companies should disclose all-inclusive costs of borrowers and take their explicit permission before...

    Stick To Your Lane, RBI Directs Digital Lenders While Releasing Regulatory Framework

    IAN, NB Ventures, Go-Ventures, Lets Venture, Grip Invest, Anicut Capital and Bollywood actress Mouni Roy participated in the funding round

    Cloud kitchen Bigspoon raises Rs 100 crore

    The Peyush Bansal-led omnichannel eyewear retailer had earlier raised $100 million in an investment round from Alpha Wave Ventures

    IPO-bound Lenskart Bags $12.5 million From Ravi Modi Family Trust