Tough Times For Delhivery As Meesho Shines With Valmo

It seems that a comparatively young e-commerce player has caused some turbulence for one of India’s largest 3PL players. This is about Meesho and Delhivery. While both of them are not directly related, Meesho’s decision to transition to an in-house logistics system – Valmo – has started impacting Delhivery’s shipment volumes. Meesho holds close to 50% market share in the 3PL space, so when it shifted its deliveries to an internal setup, the negative impact on Delhivery became obvious.

A recent report by Bernstein has downgraded Delhivery, highlighting the volatility and instability plaguing the company. The brokerage firm cited several issues including management exits and execution problems within the company. “Delhivery is a volatile company. In some quarters, it has struggled with its PTL business, led by Spoton integration issues, and some due to weak e-commerce business (Shopee exit, peak season execution issues, etc). Meesho’s insourcing is now affecting it. This, coupled with senior management exits, suggests that the ship is still unstable,” Bernstein analysts noted.

The downgrade follows Delhivery’s slip back into losses in the March quarter (Q4), reversing its surprise profit in the December quarter. The company recorded a net loss of INR 68.5 crore in Q4, although its revenue from operations increased by 12% year-over-year to INR 2,076 crore.

Meesho’s in-house logistics system currently manages 20% of its total volumes with plans to escalate this to 40% in the coming months. Valmo has already established a reach across 5,000 pin codes and boasts a cost per parcel about 5% lower than traditional 3PLs, with potential savings of 5-7% more in the next 12-18 months.

Despite Meesho’s assertion that Valmo is a system designed to modularise the delivery network rather than a standalone logistics arm, its growing capacity threatens to further erode Delhivery’s market share.

According to Bernstein analysts, Meesho needs to keep its logistics costs low, among other costs, to maintain its low-AOV (average order value) model. This cost advantage can only be attained by handling more parcels through its network.

The current scenario leaves Delhivery facing a period of significant uncertainty and volatility. As Valmo continues to expand its operations, the cost advantages it claims over traditional 3PLs will become clearer, potentially deepening the impact on Delhivery’s e-commerce volumes. Bernstein’s analysts concluded with a warning that Delhivery’s growth potential may continue to be volatile.

With the logistics landscape rapidly evolving, Delhivery’s ability to navigate these challenges will be critical to its future stability and growth.

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