After more than a year of pricing pressure and muted shipment growth, Delhivery expects margin recovery in its express parcel business, which is its largest and most profitable vertical. In its Q4 earnings call, CEO Sahil Barua said he expects overall margins to improve in FY26, as volumes increase, particularly after the integration of its smaller rival Ecom Express.
The express parcel business contributed nearly 60% of Delhivery’s total revenues for FY25. In Q4, the express parcel segment recorded nearly flat year-on-year revenue growth of Rs 1,256 crore, with 177 million packages delivered.
Ebitda margins for express parcels also narrowed to 16.2% for FY25, from 18.4% in FY24, largely due to industry-wide headwinds such as pricing pressure and demand softness.
Barua said the worst of the “suicidal pricing” in India’s express logistics space may be behind, with pricing expected to stabilise and gradually improve as unproductive capacity exits the market.
He has been candid about the “slow grind” period in the express parcel space in the last two years, marked by sluggish parcel volume growth and challenging pricing conditions, arising out of overcapacity. “The industry was plagued with excess unproductive and loss-making capacity, not just within Ecom Express but other players as well,” he said on the call.
The latest reported quarter marked the first time Delhivery achieved sequential margin expansion, an unusual trend given that Q3 has been traditionally the peak quarter. The reported Q4 service Ebitda margin for the express parcel business was 15.9%, slightly up from 15.6% in Q3.
Barua said that the express parcel logistics industry remains fragmented with numerous players, many of which are loss-making under current pricing structures.
“There were too many players in this market in the previous quarter. Our acquisition of Ecom Express has not changed that dynamic, and there are still too many players in this market,” he said, adding that consolidation is an inevitable outcome for loss-making players with no path to profitability.
Delhivery expects the Ecom Express integration, whose parcel volume is roughly 40% of its own standalone express parcel shipments, to improve network efficiency and unlock cost savings. The firm has already begun absorbing Ecom’s volumes and expects to retain about 30% of the volumes within the core Ecom Express network. It also expects capex intensity to reduce going forward due to shared automation infrastructure.
“Delhivery’s diversified revenue base, strong net cash position (Rs 53 bn pre-acquisition of Ecom Express), and reducing capex intensity (3.5-4% by FY27) are likely to help it ward off industry headwinds better vs competition,” said analysts at Emkay Global in a post-earnings research note.