Buy Delhivery Ltd for the Target Rs. 540 by Motilal Oswal Financial Services Ltd
Strong start to the festive season!
* According to the RBI, total electronic payments surged to INR11.3t on 22nd Sep’25, nearly ten times higher than the INR1.18t recorded the previous day. This sharp spike was primarily driven by the recent GST rate cut and a strong boost in festive season consumption, reflecting heightened transaction activity across retail and e-commerce channels.
* According to the players in the automotive industry, there has been a surge in demand for cars and two-wheelers following the GST rate cut. This sudden uptick in vehicle sales has led to capacity constraints across the logistics sector. Both transporters and service providers struggle to meet the heightened movement requirements of OEMs and dealers during the ongoing festive and post-GST revival phase.
* With the consolidation of express logistics players, particularly following Delhivery’s acquisition of Ecom Express, the company is expected to capitalize on the surge in festive season volumes and strengthen its market position. Furthermore, consumption activity, which had moderated amid the anticipation of GST rate cuts, is now showing a sharp rebound post the rate reduction, supporting broad-based demand recovery across major product categories in the upcoming months.
* Management, through its press release, announced a strong start to the festive season with the company processing more than 104.4m shipments (including Express and Part Truck Load (PTL) segments) during Sep’25. Delhivery, with >20% volume market share, is the largest 3PL express parcel player in India and is strategically positioned to capture disproportionate benefits from this growth. The company’s pan-India reach spans over 18,800 pin codes, supported by a modern integrated network of mega-gateways, automated sortation centers, and a high-capacity trucking fleet.
* Delhivery’s ability to serve high-growth sub-segments such as D2C brands and SME shippers provides an additional growth lever beyond large marketplaces.
Strategic expansion through the Ecom Express acquisition
* The INR14b acquisition of Ecom Express (completed in Jul’25) consolidates Delhivery’s leadership in express parcel logistics and adds a complementary rural network, strengthening its reach and customer base. This integration is likely to drive network density gains, footprint rationalization, and cost synergies.
* With rural and Tier 2-4 cities forming a substantial share of e-commerce volumes, the acquisition deepens Delhivery’s competitive moat against key rivals like Blue Dart Express and XpressBees. The combined entity is positioned to gain share as 3PL players benefit from rising cost pressures on captive logistics arms and industry-wide pricing normalization.
PTL and supply chain services remain high-growth, underpenetrated segments
* The PTL segment remains a fragmented market with less than 25% of volumes handled by organized players. Following the Spoton integration, Delhivery has demonstrated consistent outperformance through wide geographic coverage, faster turnaround times, and tech-driven process optimization. We project an 18% CAGR in PTL revenue over FY25–28, underpinned by SME and retail segment expansion, yield improvement, and adoption of value-added services.
* The Supply Chain Services (SCS) segment is scaling profitably, benefitting from the increasing formalization of warehousing, GST-led network redesign, and demand for integrated multi-location solutions like the “Prime” service. We expect SCS revenue to clock a 22% CAGR over FY25-28.
Margin expansion in the core business drives capital efficiency
* Delhivery’s EBITDA margin is projected to improve to 7.3% in FY28E from 4.2% in FY25, supported by operating leverage, improved asset utilization, and technology integration across the value chain. Management expects PTL’s EBITDA margin to reach 16–18% in the next 2-3 years (from ~11% in 1QFY26), while the express parcel service’s EBITDA margin is likely to expand to 17–18% (~16% in 1QFY26) levels by Mar’26.
* Capital intensity is moderating, with major network buildout completed and steady-state capex expected to fall to ~4-5% of revenue by FY28. A strong balance sheet with negligible debt offers significant headroom for strategic capex and acquisitions.
Valuation and view
* Delhivery is well-positioned for future growth, supported by strong momentum in its core transportation businesses and a clear focus on profitability. With Express Parcel and PTL segments delivering consistent volume growth and healthy service EBITDA margins, the company expects to sustain 16-18% margins over the next two years.
* The integration of Ecom Express is set to enhance network efficiency and reduce capital intensity, while new services like Delhivery Direct and Rapid offer long-term growth potential in on-demand and time-sensitive logistics.
* We expect the company to report a CAGR of 14%/38%/53% in sales/ EBITDA/ APAT over FY25-28. Reiterate BUY with a TP of INR540 (based on DCF valuation)
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