Delhivery
- Jinal Sanghavi
- Feb 16
- 10 min read
Updated: Jul 24
You can also listen to us on:
In this episode, we deep dive on Delhivery, a disruptor company to the age old logistics business.
From its founding in 2011 to becoming a $3 billion company and a market leader in the logistics space in India, where 1 in every 4 e-commerce parcels are handled by Delhivery. Their vision is to be the "Operating System for Commerce." In this episode, we deep dive on why is logistics important; the founding story of Delhivery; its business model and key products; what sets them apart (i.e. the mesh network vs hub and spoke); its financial performance and what lies ahead for this company.
Key timestamps for each major topic
0:00 – Introduction
Hosts (Shantanu & Jeenal) introduce themselves and the Delhivery episode.
2:00 – Logistics industry context & importance
How logistics contributes to GDP, the government’s targets, and India’s logistics cost.
4:00 – Fragmentation and opportunity in Indian logistics
Discussion of the unorganized sector, growth rates, and potential for organized players.
6:00 – Delhivery’s founding story
Origin in 2011 as a hyperlocal express service; founding team backgrounds (Sahil Barua, Mohit Tandan, Bhavesh Manglani, Surat Saharan, Kapil Bharti).
11:00 – Delhivery’s business model and scale
Fully integrated logistics, service reach (18,700 pin codes), “operating system for commerce”, and vision.
14:00 – Key revenue streams & products
Parcel/courier business (60%+ revenue), daily order volumes, part truck load, full truck load, supply chain solutions.
18:00 – Growth opportunities
Warehousing, cross-border logistics, reverse logistics, and the “fulfilled by Delhivery” analogy.
23:00 – Cash flow challenges, payment cycle
Credit terms with partners vs. clients, negative cash flows, and strategy for market share.
26:00 – What sets Delhivery apart
Shift from hub-and-spoke to mesh network, technology focus, autonomous robotics in warehouses, investment in drones.
30:00 – Spoton acquisition and integration
2021 Spoton merger, synergy and challenges, impact on part truck load segment.
32:00 – Rivigo vs. Delhivery
Business model and strategic differences: asset-heavy vs. asset-light, leadership stability, funding/dilution, last-mile “mesh” advantage.
35:00 – Financials and profitability
Shift to profitability, revenue growth, improvement in customer concentration risk.
38:00 – Current and future challenges
Competition from in-house logistics (Amazon/Flipkart), quick commerce, customer concentration, market risks, and cloud warehousing.
42:00 – Technology trends and future opportunities
Cloud warehousing, making warehousing a variable cost, elastic demand fulfillment.
44:00 – Sustainability and EVs
Role of electric vehicles in logistics, cost savings, current barriers in “middle mile”.
47:00 – Further opportunities
Quick commerce as a service, regional/national shipping, “Delhivery One” platform as a tech enabler.
50:00 – Closing thoughts
Why Delhivery is strongly positioned, final host impressions, request for listener suggestions
The Landscape
The Indian logistics sector is one of the largest in the world and presents a large addressable opportunity, with a spend of ~US$365 billion, growing at a CAGR of 9%, driven by:
● Strong underlying economic growth
● Improvement in India’s transportation infrastructure, especially highway connectivity
● Growth of the domestic manufacturing sector, driven by favourable policy support and increased domestic
and foreign investments
Organized players accounted for only ~3.5% of the logistics market (road transportation, warehousing & supply chain services only). Organized players are expected to grow at a CAGR of 35%, taking their share to 12.5-15% by Fiscal 2026 of the logistics market (road transportation, warehousing & supply-chain services only). This shift is expected to be driven by the ability of organized players to offer integrated services, network and scale-driven efficiencies and larger investments in technology and engineering, resulting in higher share of wallet with customer
The logistics market is primarily comprised of transportation and warehousing, of which transportation accounted for 70%. Total logistics spending in India was ~14% of GDP in Fiscal 2020, which is significantly higher than developed countries like Germany and the US, where logistics spend is ~8% of GDP. This is probably driven by inadequate infrastructure and a heavy reliance on road transport. The government has set the goal of bringing logistics costs down to the equivalent of less than 10% of GDP by 2030
About Delhivery
It was founded in 2011 by Sahil Barua, Mohit Tandon, Bhavesh Manglani, Suraj Saharan, and Kapil Bharati. Initially, Delhivery was a hyperlocal express delivery service for offline stores, delivering flowers and food locally in Gurgaon. With only four delivery workers, they opened their first corporate office in Gurgaon. Following that, they began communicating with nearby restaurants and completing their customers’ orders within 30 minutes. The business took off right away and they expanded their business portfolio. However, founders Barua and Tandon, who were consultants at Bain & Company at the time, recognized the potential in the rapidly expanding e-commerce segment in India and decided to focus on that instead. With a background in telecom, the thesis was to provide wide scale services at a low cost, similar to telecom using technology. The 27 year olds basically wrote an academic paper and the vision has been unfolding since the last 14 years. Eventually, they slowly expanded their wings to the B2B sector, where they started providing warehousing, transportation and delivery services.
In June 2011, Delhivery signed its first e-commerce client, Urban Touch, an online fashion and beauty retailer. By August 2011, the company had fully transitioned to providing logistics services to e-commerce companies.
Delhivery began as a small startup with big ambitions. They started by delivering packages for e-commerce companies like Snapdeal and Myntra. As online shopping increased in India, so did the demand for home deliveries, and Delhivery's business quickly grew. The founders concentrated on solving core challenges such as building trust with companies hesitant to adopt e-commerce logistics and setting up physical warehouses in different cities. So, the key points in Delhivery’s story are:
1. Focus on E-commerce: Recognizing the potential of the rapidly expanding e-commerce segment in India, Delhivery shifted its focus to providing logistics services to e-commerce companies
2. Growth in home deliveries: As online shopping increased in India, so did the demand for home deliveries, and Delhivery's business quickly grew. Today, express parcels, and more on that later, make up ~60% of the company’s revenues
3. Impact on SMEs and Startups: Delhivery supports small and medium enterprises (SMEs) and startups by offering logistics solutions tailored to their needs, helping them compete with larger companies by providing affordable and efficient logistics options
4. Customer Experience: Delhivery enhances the customer experience by ensuring timely and reliable deliveries, which builds trust and improves satisfaction
5. Strategic Partnerships: They are trusted 3P partners of big guys like Amazon and Flipkart, and have helped fueled their expansion within the country in a span of one or two days which was way less time than their standard delivery.
Business model
Upfront on its website, Delhivery states “We are building the Operating System for Commerce.” The company’s services can be divided into 3 verticals:
1. Warehousing: Units presents across 40+ cities across the country
2. Transportation: Deliveries done 18000+ pincodes and 2500+ cities
3. E- Commerce: Apart from the big boys at Amazon, Flipkart, etc. it is integrated with companies like Shopify, WooCommerce, and Opencart to deliver their products
Delhivery aims to provide its customers with competitively priced service offerings that help drive the growth of their business, and in turn, the volume of their business with us. In turn, it continues to improve cost efficiencies that pass on such cost reductions to our customers in the form of lower prices.
One key challenge in this business is the cash flow. Delhivery typically pays network partners, fleet partners and manpower agencies within 60 days from the date invoiced, while it offers customers with payment terms of up to 90 days. This billing practice has contributed and may contribute to our negative cash flows.
There are 6 key components of Delhivery’s business model:
1. Parcel and Courier Services: Delhivery’s primary business is its parcel and courier delivery services, where it handles last-mile deliveries for e-commerce platforms, businesses, and individuals. These services include picking up goods from sellers or warehouses and delivering them directly to customers’ doorsteps. Delhivery works with some of India’s largest e-commerce platforms like Amazon, Flipkart, and Myntra, making it a crucial player in the fast-growing online retail industry. Today, it delivers 40,000 to 50,000 orders a day. Express parcels comprise 60% of revenue. Delhivery has a 20% market share in eCommerce volumes. There are about 18.6k active customers.
2. Third-Party Logistics (3PL): Delhivery provides third-party logistics (3PL) services, which include warehousing, inventory management, and order fulfillment. The company manages the entire logistics process for businesses, from storing products in its warehouses to packing and shipping them to customers. By offering 3PL services, Delhivery enables businesses to outsource their logistics operations, reducing costs and improving efficiency.
3. Freight and Transportation Services: In addition to parcel delivery, Delhivery operates a freight and transportation business, providing businesses with options to transport goods over long distances. The company offers both domestic and international freight services, including air, road, and rail transport. This allows Delhivery to cater to a diverse range of industries, from manufacturing to retail and e-commerce. PTL accounts for 10-20% of revenue. The business has an 8.3% market share in this segment. Full Truck Load contributes 6% to total revenue started in FY20. There are 449 customers and 1,850 delivery partners.
4. Supply Chain Solutions: Delhivery offers comprehensive supply chain solutions that include warehouse management, inventory control, and distribution network planning. These services are designed to optimize the supply chain, ensuring that goods move efficiently from production to the end customer. Delhivery’s supply chain solutions are used by businesses across sectors such as FMCG (Fast Moving Consumer Goods), electronics, and apparel. It adds ~10% to revenue with a focus on D2C e-commerce and omnichannel retail. There are about 71 warehouses and 139 active customers.
5. Cross-Border Logistics: Delhivery has also expanded into cross-border logistics, helping businesses manage international shipments. The company offers services such as customs clearance, international freight forwarding, and cross-border e-commerce logistics. This allows Indian businesses to seamlessly export and import goods across global markets, tapping into international trade opportunities.
6. Reverse Logistics: Delhivery provides reverse logistics services, which include managing the return of products from customers to businesses. This is especially important for e-commerce companies that need to handle product returns efficiently. By offering reverse logistics, Delhivery ensures a smooth customer experience while helping businesses manage their inventory effectively
Mesh Network
The supply chain model followed by Delhivery is that of a mesh network. Mesh network is dynamic and changes based on surges in volume or hindrances in other channels. Kotak Institutional Equities has recognized as "the best available" in India's dynamic logistics market.
Mesh Network emphasizes a higher proportion of point-to-point connections with dynamic shipment routes determined typically based on an automated algorithm. The Hub-Spoke Model provides less flexibility as the main node (hub) is centrally connected to multiple other nodes and this is where Delhivery gets an advantage.
Key aspects of Delhivery's mesh network:
1. Real-time Optimization: The network employs an algorithm to optimize routes in real-time, taking into account factors like roadblocks and weather conditions.
2. Efficiency: Delhivery's mesh network has fewer touchpoints, increasing speed and inventory turnover at gateways. Inventory turnover at gateways is reportedly 10 times higher for Delhivery compared to the two times achieved by competitors using traditional models.
3. Automation: Delhivery's Tauru gateway center, its largest and most automated facility, serves 126 routes, a significant increase from 50 routes a few years ago. This facility clears inventory 10 times a day, and 14 times during peak season, while peers clear inventory just once a day.
4. Point-to-Point Model: Each facility acts as its own hub and sorting facility allowing Delhivery to pick up packages from anywhere and directly send it to the nearest sorting facility which further processes it directly to the facility closest to the delivery destination.
5. LTL Shipping: Delhivery's Less Than Truckload (LTL) shipping uses a dynamic mesh network, connecting various hubs across the country in real-time to determine the most optimal path for shipments.
This puts Delhivery in a sweet spot among its competitors. For modern-day supply chains, mesh networks are becoming an increasingly popular way to manage the flow of goods. Unlike traditional hub-and-spoke architectures, which are capital-intensive and rely on a central authority to make decisions about routing, mesh networks are highly distributed, with each node in the network connected to every other node. Using mesh networks for optimising supply chain operations results in various benefits to the companies, including the selection of the most efficient route, better flexibility in events of disruption, and enhanced resilience
Financials
The good news is that Delhivery has stopped cash burn on operations and is now achieving profitability consecutively since the past 3 quarters. Delhivery reported consolidated revenue of Rs 2,378 crore from client contracts in the third quarter of FY25, registering an 8.4% YoY. Net profit jumped 114% YoY to Rs 25 crore.
- Delhivery’s express parcel business generated 63%, or Rs 1,448 crore, of the consolidated revenue. However, this segment grew at a modest rate of 3% YoY. The number of express shipments increased by 2% to 206 million units. CEO Sahil Barua linked the slowdown in the express parcel business to muted growth in ecommerce volumes. He had previously estimated that ecommerce sector would grow by 12 to 18% during the period
- In Q3 FY25, Delhivery’s services for part truckload freight accounted for 19% of the consolidated revenue, bringing in Rs 462 crore. Here, the year-on-year growth was 22%.
- It reported 39,775 active clients for the third quarter, which was 30% higher than the figure in the year-ago period.
Key risks and Opportunities
Ecommerce majors Amazon and Flipkart are continuing to manage logistics and delivery in-house instead of contracting third-party service providers. Moreover, the online retailer now offers a range of third-party logistics and supply chain management services to businesses selling their wares on Amazon as well as other e-commerce platforms.
Its main bread and butter business - Express Parcel service EBITDA margins have been affected by increased fixed costs from new facilities and higher fleet costs during peak seasons
Compared to other listed players like Concor and VRL, profitability and ROCE is quite below industry benchmarks
Key Opportunities:
1. Launch a third-party shared quick commerce network for e-commerce brands
2. Launching a faster product for regional surface shipping and national air shipping. They are almost second or third largest company in terms of PTL in terms of volumes, whereas margins are still at 3-4% vs other players who are making, 10-14% plus margin? But there's been an absolutely sequential and continuous improvement in the overall margins of the PTL business from negative 20% to positive 3%.
3. From a product standpoint, Delhivery One, which is the panel that they use for D2C customers and for SME customers, there's a whole bunch of value added services
Barua especially described rapid commerce as a major opportunity, saying Delhivery was helping D2C brands in last-mile delivery. The company has introduced this service in Bengaluru, Hyderabad and Chennai. “The heartening news is that the D2C business has grown close to 30% YoY,” he said, adding that its volume would be smaller than the ecommerce one in the express parcel segment. Currently, the rapid commerce opportunity is generating between Rs 80 crore and Rs 100 crore of revenue to Delhivery's express parcel business in a financial year, Barua said. The margin structure will broadly be similar to that of the express business, which is between 17% and 20%.
But over the long term, I want to refer to the opportunities that Sahil alluded to in a Kalaari podcast where he was especially bullish on 1) Cloud warehousing – where the warehousing is available as a variable cost to all companies from a 1000 sq ft to 200,000 sq ft, to cater to elastic demands of soft drinks and smaller players and 2) EV vehicles integrated for sustainable transport operations. 55% of mid mile trucking costs is fuel and hugely expensive. Battery life is a concern. Injecting into operations and making it mainstream in logistics
Great links for reference:
