Delhivery Limited

Delhivery reported an 'excellent' Q3 FY26 with overall revenue from services growing 18% YoY to nearly ₹2,800 crores. The quarter saw record volumes across transportation businesses, with Express parcel shipments reaching 295 million (up 43% YoY) and PTL metric tons crossing 500k (up 23% YoY). Profitability significantly improved, with Service EBITDA at ₹421 crores (15.1% margin) and Adjusted EBITDA at ₹147 crores (8.4% margin), more than double the previous year. PAT before Ecom integration costs stood at ₹110 crores, or 3.8% of revenue.

The Express business, contributing two-thirds of total revenue, grew 24% YoY to ₹1,839 crores, driven by a 43% YoY volume growth. This performance was sustained beyond the festive peak, with strong contributions from D2C, SME, and channel partners. PTL revenue grew 25% YoY, with volumes up 23% YoY, indicating continued yield improvement. Management attributed this growth to high-quality service, technology-driven efficiencies, and expansion of sales teams into new geographies.

While SCS revenue remained flat at ₹171 crores, the segment saw a 'massive improvement' in profitability, with EBITDA margins increasing from 2.1% last year to 13% this quarter. This was a result of a strategic focus on 'earnings over growth' and exiting unprofitable portfolios, such as mother warehousing for quick commerce. The company is now seeing traction with new mandates, including for a large engineering company and a home and fashion player, signaling future growth.

Delhivery's operational metrics include covering 18,838 pincodes, serving over 51,000 customers, and utilizing 21.9 million square feet of infrastructure. Significant technology investments, such as auto-docking solutions, have led to real savings and improved productivity. The successful integration of Ecom Express assets, with costs significantly lower than initial forecasts (₹150-160 crores vs. ₹300 crores), further enhanced network utilization and efficiency.

The company maintains its capex guidance, expecting it to decline to 4-4.4% of revenue in the medium term. Investments in new businesses like Delhivery Direct (intracity on-demand services) are projected to be ₹60-70 crores annually, with a total new business investment of ₹60-80 crores next fiscal. Delhivery aims for Free Cash Flow breakeven at 6% Adjusted EBITDA, driven by 5% capex and 1% working capital increase. The business is expected to generate 25-30% ROIC on tangible assets, with asset turns of 3x in the steady state.

Management asserted Delhivery's competitive advantage stems from its unique cost structure, integrated network, and ability to deliver high reliability and speed at the lowest cost. They believe their model is superior to 'express-only' models or those with high client concentration, which struggle with network efficiencies and operating leverage. The company's low client concentration protects it from individual customer strategy changes, and it expects to continue gaining market share despite inflating labor and real estate costs.