Delhivery, one of India’s leading logistics and supply chain service providers, has faced a notable dip in its stock performance, with shares falling nearly 9 percent over the last two trading sessions. The sell-off came in response to investor concerns over the short-term financial impact of its recent acquisition of rival logistics player Ecom Express.

The acquisition, valued at around ₹1,400 crore, was announced on April 5, and initially pushed Delhivery shares up by over 3 percent on April 7. However, that optimism was short-lived, as the stock plunged 7 percent on April 8 and continued its decline on April 9, falling by another percent. The sudden reversal has raised questions among analysts and investors about the earnings potential of the deal in the near term.

What Emkay Global says about the acquisition

A research note from Emkay Global Financial Services sheds light on why the market may be cautious. According to the brokerage, while there are long-term synergies and scale benefits from the acquisition, there are significant integration costs that will stretch over 12 to 18 months. These costs, in Emkay’s view, will delay any earnings accretion from the acquisition.

The firm stated, "Improvement in network utilization should aid profitability once networks are integrated." The note added that Delhivery’s experience with the Spoton acquisition gives it a learning advantage and might help in smoother network and client integration this time.

Despite the concerns, Emkay has retained its ‘Buy’ rating on Delhivery, citing that the stock is currently attractive in terms of valuation. However, the target price has been slashed to ₹400, reflecting a 61 percent upside potential from its last closing price.

Concerns from Meesho’s insourcing move

Another potential headwind for Delhivery comes from Meesho, a major online shopping platform that has been a key client. According to Emkay, Meesho is planning to increase its in-house logistics capabilities, which could affect Delhivery’s shipment volumes in the short term.

Meesho’s insourcing move is expected to cast a shadow on Delhivery’s volume growth trajectory, particularly at a time when the company is actively trying to consolidate its position post-acquisition.

Valuation and past performance

Delhivery's stock was listed on the Indian stock exchanges in May 2022 at ₹493 per share, but since then, the stock has shed over 50 percent from its listing price. The recent acquisition was initially perceived as a strategic move to consolidate Delhivery’s leadership position in the B2C logistics segment, but the lack of near-term profitability gains has made investors wary.

It is important to note that Delhivery had made previous acquisitions like Spoton Logistics, which provided valuable integration experience. This time, analysts believe the majority of customers between Delhivery and Ecom Express overlap, making client retention smoother, but operational integration still remains a complex and expensive process.

Market outlook for Delhivery

In the near term, Delhivery may continue facing headwinds due to:

• Integration-related expenses and operational inefficiencies as the two logistics networks merge

• Potential volume dip due to client moves like Meesho’s insourcing strategy

• Investor skepticism about short-term earnings impact and market volatility

However, long-term investors may still find value in the stock, particularly given that India’s logistics sector is on a growth trajectory, and Delhivery is well-positioned to benefit once the Ecom Express integration stabilizes.

Conclusion: Strategic move but with short-term pain

Delhivery's acquisition of Ecom Express marks a bold strategic step in the Indian logistics landscape. While the long-term benefits in terms of scale, network efficiency, and market consolidation are undeniable, investors will need to brace for short-term financial turbulence.

For now, the company’s ability to manage integration costs, retain key clients, and improve utilization of its combined logistics network will be the critical factors that determine its financial trajectory in the upcoming quarters.

As brokerage firms like Emkay retain their positive long-term stance, the market will closely watch how Delhivery balances growth ambitions with operational discipline.

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