Sudip Bandyopadhyay on why Delhivery is not like other new age tech IPOs

“I am advising everybody to be cautious and hold back from investing their entire available surplus. Biting into good stocks which have corrected significantly in small quantities is not a bad idea, but deploying all your money in this market is not advisable. Markets can still go down, assuming the US market continues to fall and the risk averse mood continues, ” says Sudip Bandyopadhyay, Group Chairman, Inditrade Capital.

How are you analysing what is going on in the market? Are you cautious and worried that we are susceptible to a bigger fall than what we have seen so far?
Definitely one needs to be cautious. Domestic investors have been rock solid and they have been supporting Indian markets and that has held the market back. FIIs have been selling relentlessly. So yes, it is a matter of concern and there is significant volatility. It is better to be careful and watchful. Things can improve. Corporate results have by and large been in line with expectations.

As soon as the foreign market stabilises, particularly US markets where the US market factors in the interest rate hike cycle, things can turn around but as of now, it is a matter of caution. It is better to be cautious.

How are you approaching this market? Are you sitting in most of your positions? Are you looking to buy into areas or are you net short?
I am advising everybody to be cautious and hold back from investing their entire available surplus. Biting into good stocks which have corrected significantly in small quantities is not a bad idea, but deploying all your money in this market is not advisable.

Though it is anybody’s guess how prolonged this sideways correction or corrective phase in the market could be, do you see this go on for six months more or do you see eventually valuations and time correction to start playing and things getting very attractive?
It is very difficult to say. One has to wait and watch. We have seen some corrections. Markets can still go down, assuming the US market continues to fall and the risk averse mood continues. It can take a further hit. Assuming domestic investors start withdrawing, the markets can fall very fast. But this is a doomsday scenario. We do not subscribe to extreme views. We believe that the market will remain volatile. It will move sideways but the significant correction from here on is not expected unless there is a major geopolitical turmoil.

There are some interesting names on the IPO street, LIC got over nicely. There is Delhivery IPO around the corner. Why does it interest you?
I think this is a unique company. They are the largest fully integrated logistics player in the Indian market. They have express parcel service. They have part truck load, full truck load and supply chain solutions. They have used technology and automation to the hilt and there is absolutely nobody in the market in that space.

On the other hand, the services industry – whether it is telecom or other infrastructure service players – is getting consolidated. There are one or two large players, Pretty much the same thing is happening in this space. We had N number of small players, unorganised sector. Delhivery has formed an excellent niche and they are operating in that area. Though I call it niche, it is a very big area in an economy and with GDP growing this is also growing.

The opportunity size is close to $400 billion by 2030 and that is the market in which Delhivery is operating. It is a great team which has been together for a very long time. We have to wait and watch the valuation and other things but the way the company has performed, the way the company has improved on a continuous basis, I would say it is a different IPO. We should not compare it with these new generation technology IPOs because those companies were trying to popularise some concepts, some themes which they were working on.

Those may or may not catch on, but Delhivery is in a tested and tried area. Everybody needs logistics. This has been an industry which has been there since the time human civilisation started. So it is not a new need. It is just organising, re-organising the need in a much more efficient and technology aided manner.

How do you see the role of technology in logistics because increasingly more and more companies are talking about this particular company. They have a very integrated use of technology in running their operations. How could this become a differentiating factor going forward?
Sudip Bandyopadhyay: These days, a company which is able to use technology efficiently will eventually become the leader. Logistics is one space where there was significant wastage and significant inefficiencies. If Delhivery or somebody else tomorrow comes and uses technology in an efficient manner, there is a significant opportunity of gaining efficiency and passing on part of that to the customers and retaining part of that to benefit the shareholders of the company.

Delhivery is in exactly that space. They have put up state-of-the-art warehouses and logistics facilities. They are trying to create a platform where they can integrate a whole lot of small service providers also. It is not that they are going to only compete with smaller unorganised players, they will probably provide an ecosystem whereby even those guys can benefit.

It is a unique company in that sense and their growth will be related to the economy. If you believe that the economy is going to grow rapidly, then Delhivery also will continue growing rapidly. We understand they have been growing about 50% year on year in the recent past because it was a wide space. They have got a very good run and they have a tie-up with players. FedEx is a shareholder and with FedEx being there, their international logistics business is also looking very promising.

Do you see value emerging in broader markets beyond the largecaps? Or do you think that if the market corrects 5% to 10% further, then it will be prudent to go for largecaps only? Any preferences?
I will like to be very stock specific and sector specific in this market. The volatility is here to stay. Yes the largecap is a good place to be but one has to decide which sector and which largecap has seen significant correction. I think some of the BFSI companies, particularly the largecaps look good. Cement and IT largecaps also look good if you are a long-term investor.

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