Meesho IPO Opens Today: Is Valmo's Logistics Surge Secretly Threatening Delhivery's Dominance?

Meesho's Initial Public Offering (IPO) commenced accepting bids today, December 3rd, and will continue until December 5th, with its stock market debut scheduled for December 10th on both Indian bourses. Amidst market anticipation for its listing, a significant question has emerged regarding its competitive landscape: Is Meesho quietly becoming a major challenge to Delhivery, a prominent logistics provider?

Jefferies Report Flags New Logistics Model

A report by Jefferies suggests that Meesho's fast-growing logistics strategy could pose a significant challenge to Delhivery. The brokerage has maintained an 'Underperform' rating on Delhivery with a target price of Rs 390, indicating a potential downside of nearly 9%.

According to the report, Meesho's latest Draft Red Herring Prospectus (DRHP) reveals an increasing reliance on its own logistics network, Valmo, rather than depending fully on third-party logistics (3PL) partners like Delhivery. Jefferies noted that "Meesho’s DRHP indicates rising insourcing through its logistics platform Valmo."

How Valmo Operates

Logistics forms the backbone of marketplaces, and costs in this area are crucial for operational efficiency. Meesho currently fulfills orders using two main methods: through large 3PL partners like Delhivery, and through Valmo, its integrated logistics platform. Valmo brings together various delivery players, sorting centres, truck operators, and first and last-mile service providers under one umbrella. On this platform, each order goes through multiple logistics providers, with Valmo introducing competition to drive down logistics costs.

Valmo's Rapid Growth and Cost Efficiencies

Jefferies highlighted that Valmo's growth has been rapid, handling just 2% of Meesho’s orders in Financial Year 2023 and soaring to 48% by Financial Year 2025. A striking observation is that Meesho now enjoys "1–11% lower cost per shipment on Valmo vs. 3PL." These efficiencies were reportedly passed on to sellers in FY25, reflected in lower costs for them.

Significance for Delhivery

Delhivery derives approximately 60% of its Financial Year 2025 revenue from its Express Parcel business, a substantial portion of which comes from e-commerce marketplaces. Jefferies estimates that Meesho alone accounts for around 16% of Delhivery’s sales. Therefore, any shift in Meesho’s logistics strategy is critically important. If Meesho continues its aggressive insourcing, Delhivery’s volumes in the Express Parcel segment could come under significant pressure. Jefferies added that "a potential rise in insourcing is a risk to Delhivery’s Express Parcel business."

Market Reaction

Investors and analysts will be closely monitoring how this strategic shift impacts Delhivery's future performance and if it forces other e-commerce platforms to reconsider their logistics strategies. The market debut of Meesho also adds another layer of interest to this unfolding competitive dynamic.

Impact

• This development could intensify competition within India's rapidly growing logistics sector, particularly for e-commerce deliveries.
• Third-party logistics providers like Delhivery may face increased pressure on volumes and pricing if major clients continue to insource operations.
• Investors in Delhivery may need to assess the company's strategies to counter this growing trend.
• Impact rating: 7/10

Difficult Terms Explained

• IPO: Initial Public Offering. The process by which a private company first sells shares of stock to the public.
• Bourses: Stock exchanges where shares are traded.
• DRHP: Draft Red Herring Prospectus. A preliminary document filed with regulators containing key information about a company planning an IPO.
• 3PL: Third-Party Logistics. Companies that provide outsourced logistics services such as warehousing, transportation, and distribution.
• Insourcing: Bringing services or operations in-house rather than outsourcing them to external providers.
• Express Parcel Business: A segment of the logistics industry focused on the fast delivery of smaller packages, common for e-commerce.
• Marketplace: An e-commerce platform where multiple third-party sellers list and sell their products.
• Underperform Rating: A stock rating indicating that the analyst expects the stock to perform worse than the average stock in its sector or the broader market.