The proposed initial public offering (IPO) by the Gurgaon-based logistics tech startup - Delhivery, has provided a much-needed fillip to the logistic services sector. Several companies namely, Blue Dart, Gati, and Gateway Distripark are witnessing increased investor interest following Delhivery’s plan to sell a 10-15 percent stake for $500-600 million through IPO.
The listed logistics firms witnessed a sharp move in their stock prices recently on the growth prospects of the industry with the lifting of COVID-19 restrictions across the country.
The shares of TCI Express rose 52 percent in one month and is up 57 percent YTD; Mahindra Logistics gained 11 percent in a month, while rallied 40 percent, YTD.
Shares of Gati and Aegis Logistics jumped 41 percent and 10 percent, respectively, in the last month. Gateway Distriparks has rallied 16 percent in one month and is up 150 percent YTD.
Investments in the warehousing space, increasing demand with rising e-commerce volumes, and hopes of sustainable last-mile delivery economics seem to attract investors’ towards the logistics sector.
In a recent report, ICICI Securities listed out key long-term trends working in logistics.
An increase in adoption of organised warehousing, increasing share of rail in Indian freight, increasing ecommerce penetration in tier-2/3 cities and supply chain becoming more unpredictable as channels to serve increases with increased demand of end-to-end logistics management contract, are all long term positives for the sector.
After the implementation of GST, a gradual move towards organised large-format grade A+/grade A++ warehousing is leading to significant business opportunities for sector participants, ICICI Securities said.
Smaller Indian cities are now accounting for a bigger volume of ecommerce sales. Ecommerce growth in tier 2 and tier 3 cities in India is outpacing that of tier 1 cities. Volume share of these smaller cities in India’s ecommerce market increased to 46 percent in Q4CY20 from 32 percent YoY.
Also, online spending per customer in tier 2 and tier 3 cities have improved which has raised hopes of sustainable last-mile delivery economics emerging for the industry — yet hyperlocal last-mile small parcel deliveries remain economically as challenging as ever.
There is also an increased incidence of end-to-end logistics contracts.
"The trend, while accreting value to the service provider, also gains currency as the emergence of multiple channels is increasing supply chain challenge and risks. This, in a way, is also augmenting demand for organised warehousing," ICICI Securities said.
(Edited by : Jomy Jos Pullokaran)
First Published: IST