Delhivery claims Ecom Express used incorrect numbers in its DRHP

ABSTRACT

Delhivery did not mention the name of Ecom Express, but from the numbers given it appeared that it was Ecom Express

A publicly traded logistics major has accused Ecom Express of miscalculating its fiscal year 2024 shipment volume by adding return to origin (RTO) shipments to the total.

Considering the industry average RTO of 14-18%, Delhivery estimates that Ecom Express shipments will be around 450 million in fiscal 2024

Direction logistics Delhivery alleged that its rival Ecom Express had repeatedly used false information about the former in its draft issue prospectus (DRHP) filed with the Securities and Exchange Board of India (SEBI).

Delhivery made these allegations in its investor presentation in a section titled “Benchmarking in Peer DRHP.” While Delhivery did not mention Ecom Express by name, it was clear from the numbers it was referring to Ecom Express.

As per Ecom Express’s DRHP, the shipment volume stood at 514.41 million in the financial year 2023-24 (FY24) as against Delhivery’s 740 million. However, Delhivery claimed that Ecom Express’ shipments stood at around 450 million after including return to origin (RTO) shipments.

A major publicly listed logistics service provider said that while it counts the delivery leg (the flow of goods from manufacturer to customer) and the undelivered or RTO leg as one shipment, Ecom Express counts them as two shipments.

Considering the average industry RTO of 14-18%, Delhivery estimates that Ecom Express will see around 450 million shipments in fiscal 2024.

“The volume of shipments used in the denominator of the CPS (Cost Per Shipment) calculation is not like-for-like – the peer is likely double-counting RTO shipments, thereby overstating the volumes and understating the CPS. Peer’s CPS will increase by INR 7 crores (around 15%) after taking into account the volumes comparable to Delhivery,” the startup claimed.

As per Ecom Express’ DRHP, CPS has come down to INR 39.65 crore in fiscal 2024 from INR 45.40 crore in fiscal 2023 and INR 47.33 crore in fiscal 2022.

Delhivery also said that the comparisons between “Service EBITDA” and “Corporate Expenses” made in DRHP Ecom Express are not necessarily correct due to lack of clarity on a “consistent definition” of “Corporate Expenses”.

He further said that the CPS comparison is “problematic for several reasons”. He said that the metrics per shipment differ based on the weight of the shipment. Hence, the CPS of Delhivery and Ecom Express will be different due to the different customer mix.

“Peer has the highest customer concentration, accounting for 52% of revenue (compared to 16% for Delhivery), which means that Delhivery’s average single parcel weight is around 2x heavier than its competitors,” the statement reads.

Interestingly, Delhivery also mentioned its national footprint in its investor presentation. In doing so, it subtly pointed out another inconsistency in DRHP Ecom Express.

“Delhivery delivers across India and covers 18,793 pin codes as of March 31, 2024. As per the Government of India, there are 19,300 unique pin codes in India,” it said.

Meanwhile, Ecom Express said in its DRHP that, as per MapMyIndia, it supports over 27,000 PINs covering around 97% of the population. “Such a broad reach enables Ecom Express to support over 25,000 Tier 2+ PINs by fiscal year 2024, which uniquely positions it to leverage the growing B2C e-commerce GMV from these regions,” the DRHP reads.

Inc42 has reached out to Ecom Express for comment on Delhivery’s allegations. The story will be updated once a response is received.

This development comes almost a month after Ecom Express filed its working papers for an IPO worth up to INR 2600 Cr. Startup filed his DRHP on August 16 on the IPO which will comprise a fresh issue of INR 1,284.5 Cr and an offer for sale of INR 1,315.5 Cr.

Ecom Express plans to use the IPO proceeds to set up new processing centres with automation and new order fulfilment machines (estimated investment of INR 387.44 million), invest in IT equipment (INR 73.71 million) and strengthen cloud infrastructure (INR 239.23 million).

Ecom Express primarily competes with Delhivery, Bluedart, Xpressbees, Shadowfax in the B2C e-commerce express delivery segment in India. While he mentions that Delhivery generates the largest revenue in the market, he also said that in terms of net income, it lags behind Blue Dart.

It is entering the stock market while it is still a loss-making entity. Its consolidated net loss was ANDNR 255.8 Cr in FY2024, down 67% from INR 428.1 Cr in fiscal 2023. Meanwhile, revenue from operations increased marginally by 2.15% to INR 2609 Cr in fiscal 2024 from INR 2553.9 Cr in the previous fiscal.