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HomeStoriesSoftBank's Surprise Move: Why The Japanese Conglomerate Is Selling Delhivery Shares Now?

SoftBank’s Surprise Move: Why The Japanese Conglomerate Is Selling Delhivery Shares Now?

SoftBank’s Surprise Move: Why The Japanese Conglomerate Is Selling Delhivery Shares Now?

HIGHLIGHTS:

  • On Wednesday, the Japanese investment behemoth SoftBank sold a 3.8% share in the logistics service provider Delhivery in a block transaction for $954 crore.
  • On Thursday morning, shares of Delhivery fell by 2%.
  • With an ownership of 14.62%, SoftBank is still the sole largest shareholder in the business.

SoftBank, the Japanese conglomerate and one of the world’s largest technology investors, has reportedly sold shares worth INR 7,954 crore (approximately $1.1 billion) in Indian logistics firm Delhivery. The move comes after the logistics firm recently raised $277 million in funding from existing and new investors, including Fidelity and Coatue.

The stock of logistics operator Delhivery fell 2% in the morning session on Thursday, a day after Japanese investment giant SoftBank sold off a 3.8% share in the business, reducing its ownership to 14.62 per cent. Shares of Delhivery had increased by slightly more than 1% on Wednesday.

The Bombay Stock Exchange (BSE) reports that SoftBank sold shares worth 954 crores in a bulk transaction at 340 each. Masayoshi Son’s Japanese investment group, which invested $380 million (or roughly 3,100 crores) in Delhivery.

SoftBank

Until May 2022, when Delhivery plans to go public, SoftBank owned a 22% share in the business. Its ownership had decreased to 18.42% as of the end of December 2022. SoftBank is still Delhivery’s top stakeholder, holding a 14.62% stake.

Delhivery made its stock market debut in May 2022 with modest gains; the stock started at $495, just over the $487 issue price. Delhivery’s stock price has since decreased by more than 30% from the time of its debut. Thus far, in 2023, the stock has increased by just under 3%.

Recent stock sales by SoftBank in modern Indian companies.

In recent years, SoftBank has decreased its ownership shares in several cutting-edge Indian companies. In November 2022, it exchanged a 4.5% stake in One97 Communications (Paytm) for $1,631 crore.

In December, the Son-led investment behemoth reduced its ownership in PB Fintech, the parent company of Policybazaar, by half while earning $1,043 crore.
According to reports, the fund also plans to sell Paytm shares on the secondary market. Paytm denied these allegations in a filing with the exchange, saying, “The business is not involved in any conversations or activities as described in the news piece.”

According to reports, SoftBank experienced a $5.9 billion loss in the three months preceding December. It lost over $5.5 billion in just its renowned Vision Funds in October and December, “reflecting decreases in the share prices of a wide variety of portfolio companies.” The fund posted a $10 billion loss in the prior quarter.

The Sale

SoftBank Group Corp, the Japanese multinational conglomerate, has sold shares worth INR 7954 crore (approximately USD 1.1 billion) in the Indian logistics company Delhivery, as per the regulatory filings. The sale marks one of the most significant exits by SoftBank from an Indian portfolio company, highlighting its strategy to focus on profitable investments and trim down its exposure in loss-making ventures.

SoftBank’s association with Delhivery dates back to 2015, when it first invested in the company’s Series C funding round. Since then, SoftBank has been a key investor in the company, participating in multiple funding rounds and increasing its stake to become the largest shareholder in Delhivery. The recent share sale by SoftBank is seen as a move to generate liquidity as the company looks to strengthen its balance sheet and make new investments in the wake of the pandemic.

The logistics sector in India has witnessed significant growth in recent years, fueled by the rise of e-commerce and the need for efficient supply chain management. Delhivery, founded in 2011, has been at the forefront of this transformation, offering end-to-end logistics services to businesses across various industries.

SoftBank

The company has proliferated, expanding its reach to over 19,000 pin codes in India and serving over 800 cities. SoftBank’s decision to sell its stake in Delhivery is seen as a significant development for the Indian logistics industry. Here’s a closer look at what this means for Delhivery and the Indian startup ecosystem:

Growth Potential

The logistics industry in India is rapidly growing, driven by the country’s e-commerce boom and the increasing demand for same-day and next-day delivery. According to a report by Ken Research, the Indian logistics market is predicted to rise at a CAGR of 10.5% between 2021 and 2025, reaching a market size of $215 billion.

Delhivery is well-positioned to take advantage of this growth, given its extensive network and strong reputation in the industry. The company has also been expanding into new areas, such as e-commerce enablement and freight services, to diversify its revenue streams and capture a larger share of the market.

Impact on Delhivery

SoftBank’s exit from Delhivery is not entirely unexpected, given the Japanese conglomerate’s recent focus on trimming down its portfolio and exiting loss-making ventures. However, the news of the share sale has still raised questions about the impact on Delhivery’s future growth prospects.

Delhivery has been planning to go public for some time now, with reports suggesting that the company was looking to launch its initial public offering (IPO) by the end of 2021. The share sale by SoftBank is likely to have some impact on Delhivery’s IPO plans, as it could affect the company’s valuation and investor sentiment. However, given Delhivery’s strong performance in recent years and its leadership position in the Indian logistics industry, the impact is likely to be minimal.

The share sale also opens up opportunities for other investors to enter Delhivery’s shareholder base, potentially bringing in new capital and expertise. This could be beneficial for Delhivery’s long-term growth as it looks to expand its footprint and diversify its service offerings.

Impact on the Indian startup ecosystem

SoftBank

SoftBank’s exit from Delhivery is also significant for the Indian startup ecosystem, as it highlights the importance of profitability and sustainability in the current investment landscape.

SoftBank has been a major investor in Indian startups in recent years, pouring billions of dollars into ventures across various sectors. However, the conglomerate has also faced criticism for its aggressive investment strategy and focus on growth at the expense of profitability.

The share sale by SoftBank in Delhivery is a reminder that investors are now looking for profitable and sustainable ventures rather than just growth. This is a positive development for the Indian startup ecosystem, as it encourages startups to focus on building sustainable business models and generating profits rather than just chasing valuations.

Conclusion

Some people might be surprised by SoftBank’s decision to sell its interest in Delhivery, considering the logistics company’s solid growth prospects and stellar reputation in the sector. Yet it’s crucial to consider that the Japanese conglomerate has been divesting from its non-core assets for the past few years, and this sale is part of that broader strategy.

Delhivery, on the other hand, remains well-positioned to continue its rapid growth and capture a larger share of the Indian logistics market. The company’s recent funding round, which brought in new investors and raised a significant amount of capital, is a testament to its strong potential.

As the logistics industry in India continues to grow, Delhivery will likely play an increasingly important role in enabling e-commerce and facilitating supply chain management. Its extensive network and diversified revenue streams make it a valuable player in the industry. It would be fascinating to watch how the business develops and grows over the next few years.

Edited by Prakriti Arora

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