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Hi @Surender

(I have repeated some points in the below post, excuse me).

This is a definite negative (I’m not writing this with the hindsight benefit of stock correction) & I was surprised with the update & literally was prepared for down circuit but to my luck it opened with nominal cut and I made an immediate decision.

I was also surprised because as per reports Meesho had excellent festive sales & Delhivery services them.

Last quarter con-call, management blamed the results partially on Shopee exit & SpotOn integration.

Negative because the market majorly valued Delhivery purely based on “hyper” growth. Even my entire allocation towards tech stocks is primarily based on “hyper” growth. For “high” growth, market already has companies like Bajaj Finance, Page, Dmart etc. & I personally have Page, Kotak, Dmart etc. So, if Delhivery grows at 25% with path to profitability stretching till FY26 (because if growth slows down, does the business model has the ability to generate profits near term with such growth?) & Kotak grows at 25% with formidable business model, then what incentive I have to stay with Delhivery? Market so far has forgiven small issues here & there but it can’t forgive on “hyper” growth factor.

If the growth slows down to say, 25% from 45% then the company should be brimming with profits to get those valuations because otherwise, market has other options. These valuations are because you grow at 40% plus and one day turn into mega profits.

1. I want 40-45% revenue growth with path to profitability. Or

2. 20-25% revenue growth with stable margins.

3. I definitely don’t want 25% growth with no profitability.

4. I want promise of 15-20% revenue & profit growth available at 20 PE so I can make money on re-rating first & then evaluate. (I bought Anand Rathi, CMS Info, Mahindra CIE, federal bank on this premise apart from technical analysis).

Qualitative factors:

1. If I promised 45% growth to shareholders, that should be achievable more or less irrespective of the macro – given that the sector opportunity is humongous. Just 6 months down the line I should not blame it on the macro for the slowness of the growth.

2. True, no one can predict macro & if this is the case, then don’t claim such hyper growth projections in the first place as a given. Probably, I personally should have been sceptical?

3. Management should have the vision to predict sector tailwinds or headwinds at least 6 months to a year ahead of the time, except under exceptional circumstances. I think the management will get the hints as they are in the business day in & day out.

4. Personally, this breaks the trust, integrity factor & I generally sell brutally if I have an iota of doubt on this aspect.

Having said all this, Delhivery really built excellent business with foresight, technological capabilities & all this could have been exceptional circumstances for them. So, I believe they will sort this out & emerge stronger in due course just like Page weathered 2018 storm. So, this is will be in my watch list for re-entry. Also, I think they ate more than they can chew with SpotOn acquisition. Market rumours say that the integration is not going well. All this could have been OK had the growth continued.
It’s a matter of time before market makes adjustments for growth projections versus profitability. Since they have already said slower FY23, market has a lot of time & so do I. Money flows out for “opportunity cost”.

I will watch out for growth, profitability, technical charts, management talk & walk.

Thanks!

EDIT: I did not get this thought but what you said seems good suggestion – see Bluedart’s numbers & management commentary and correlate.