Delhivery Ltd Management Discussions

Macroeconomic outlook Global economy

FY24 witnessed a resilient global economy despite the uneven growth. The year was marked by a considerable surge in inflation, followed by a globally synchronised monetary policy tightening, continued supply chain disruptions in the aftermath of the pandemic, the Russia-Ukraine war impacting global energy and food trade, geopolitical tensions between Israel and Palestine and increased anti-globalisation rhetoric. Despite the gloomy predictions, the world avoided a recession, the banking system proved largely resilient, and major emerging market economies did not suffer significant challenges. As per the IMFs World Economic Outlook update, July 2024, the global economic growth for 2025 will likely hold steady at 3.3% and inemerging markets and developing economies, growth will likely be stable at 4.3%.

Indian economy

Currently the fifth-largest economy in the world, India is one of the fastest-growing economies. It is likely to be among the top three economic powers in the world by 2035, supported by its demographics and strong fundamentals. The Reserve Bank of India has projected Indias GDP to grow at 7.2%¹ in FY25. During FY24, India demonstrated remarkable resilience in navigating global headwinds and registered a Growth rate of 8.2%, which was the highest among the major economies. Flowever, private final consumption remained low during FY24. According to the Reserve Bank of India, private consumption expenditure growth fell from 6.8% in FY23 to 4.0% in FY24. According to the IMF, Indias GDP was US$3.9 trillion in 2024

and will likely surpass US$5 trillion by 2027². The logistics and transportation sector will be one of the frontline sectors that will benefit from the surge in the GDP.

Global logistics industry overview

The global logistics market accounted for US$7.98 trillion in 2022 and will likely grow to US$18.23 trillion by 2030 at a CAGR of 10.7% from 2023 to 2030. The growth in the global logistics market will be primarily driven bythe growth in online retail. Asia-Pacific is the leading regional market worldwide. The advancements in technology, such as automated material handling equipment, GPS and biometrics are helping organisations and businesses work efficiently, thereby stimulating the growth of the logistics market in the region.

India logistics industry overview

In India, the logistics sector is a significant contributorto the overall growth of the economy. More than 22 million people rely on it for their livelihood. The sector is projected to add 10 million jobs by 2027³. As a key enabler of trade and commerce, the logistics sector underpins economic development, enabling nations like India to harness theirfull potential and achieve sustainable progress. The revenue from logistics sector in India was US$382 billion in 2021, and the market is predicted to increase to US$531 billion by 2026, at a healthy 6-7% year-on-year growth rate. India jumped six places over last year to 38 out of 139 countries in the 7^th edition of the Logistics Performance Index (LPI 2023) released bythe World Bank. Transportation is the largest segment of the logistics sector in India. Currently, the road transportation sector has the largest share in terms of tonnage, around 66%, of total cargo movement, followed by railways⁴.

Domestic road transportation: Domestic road transportation represents freight movement through the national and state highway road network and in-city delivery within India. Improving reliability and reducing turnaround times due to improvements in road infrastructure, relatively low cost of operation, and increased load-carrying capacity of trucks have led to road transportation having a higher share of freight traffic than other modes. Domestic road transportation market consists of three segments:

• Express parcel: Mainly composed of e-commerce shipments, speed post and document courier with individual parcels weighing less than 40 kg and turnaround time of typically less than three days.

• Part truckload (PTL): Domestic road transportation service with a total shipment weight of 40-1,000 kg which is insufficient to fill a full truck. Therefore, the volume of multiple shippers is clubbed together at consolidation centres into full truckloads before movement. PTL services can be further segmented into express PTL, with turnaround time similar to express parcel and economy PTL, with slower turnaround time.

• Truckload (TL): Domestic road transportation service where the shipper requires a dedicated truck or trailer, typically moving directly from the point of departure/origin to the point of destination.

Domestic rail transportation: Domestic Rail Transportation includes movement of shipments over public and private rail networks. India has the worlds fourth-largest rail network after the US, China, and Russia. Railways after roadways account for the second-highest percentage of goods moved in terms of volume. It is one of the most cost-effective modes of bulk freight transportation for shipments like commodities (e.g. coal, iron ore and cement), agri products (e.g. fertilisers, food grains and mineral oils) and raw materials.

Domestic air express transportation: Domestic air express transportation includes movement of shipments using dedicated cargo aircraft or belly capacity on passenger flights. This is a significantly more expensive mode of transportation used mainlyfor applications such asdelivery of critical medical supplies like vaccines, time-sensitive products such as certain critical spare parts or critical documents such as passports, and banking documents. Despite being significantly costlier than other modes, it remains a preferred mode for certain product categories.

Cross-border transportation: Cross-border transportation includes the movement of shipments into and out of India, either as individual parcels (courier) or freight. This may be carried either via air or via sea. Furthermore, sea freight

movement is containerised and may be either LCL (less than container) or FCL (full container) in nature.

Supply chain services: Supply chain services represents integrated services comprising of warehousing, transportation and other value-added services such as packaging, kitting, labelling and technology services such as warehouse management and inventory management systems. This is a more sophisticated form of logistics service provided by specialised third-party providers and typically focused on specific industry verticals and large enterprise customers with complex supply chain requirements. The growth in the manufacturing, retail, FMCG, e-commerce and supply chain services drives the demand for warehousing. Furthermore, supportive government policies such as GST, establishment of logistic parks/multi-modal logistics parks (MMLP) and free trade warehousing zone (FTWZ) will likely be significant drivers for the sector.

Key trends and factors driving growth and structural changes for the Indian logistics industry include:

• Economic growth: The Reserve Bank of India has projected a 7.2% growth rate for India in FY25. The projected growth rate is higher than the growth rate estimated for other emerging and developing Asian countries. Increasing consumption and the growth of various businesses are expected to be the major drivers of growth in India.

• Rising consumer incomes and changing preferences:

Indias per capita GDP reached US$2.73 thousand⁵ in 2024. The middle-income segment, with an annual household income of US$7,500-15,000, is projected to grow from ~27% to ~40% of the population in the next five years. Additionally, over 50% of the population is currently under 30 years of age and digitally native, resulting in rapid growth in purchases of products and services online.

• New B2C commerce models: In addition to e-commerce marketplaces, new models like social commerce, omnichannel commerce and direct-to-consumer (D2C) commerce continue to disrupt traditional retail models. Category expansion will also likely drive growth, with segments like consumer durables/white goods, home and furniture rapidly transitioning online. Overall, these structural changes in the consumption economy will likely increase the demand for reliable logistics and drive the growth of organised logistics players.

• Evolving B2B business models: The emergence of new distribution channels, new go-to-market strategies such as direct-to-retail (D2R) and D2C and government initiatives like Make in India and production-linked incentive schemes are driving the need for greater speed, precision and visibility in traditional B2B supply chain operations.

• Demand for integrated services: With the rollout of GST, enterprises are optimising supply chains for speed and efficiency instead of tax reasons. This shift towards a total-cost approach is driving the demand for third-party players capable of providing integrated warehousing, transportation, and technology solutions instead of numerous traditional monoline players. In addition, the economic growth of Tier-ll cities and beyond is further driving the need for players with deeper national capabilities.

• Technology-led transformation: The availability of new technology and business intelligence tools enable organised logistics companies to solve various problems such as truck utilisation, route consolidation, demand forecasting, facility and infrastructure placement, inventory management, and fraud detection. In addition, hardware investments in automated parcel sortation systems, material conveyance systems, AGV/AMR systems, ASRS, and broader penetration of warehouse management systems are improving operational throughput and precision, thereby lowering human errors and operating costs. Using drones in the logistics sector has also gained momentum and has the potential to enable a wide range of applications.

• Connected logistics: Connected logistics is a set of interdependent communication devices and softwarethat help gain real-time information about the goods shipped through various modes of transport. It shares relevant data and information related to logistics to smoothen the transportation process. Increase in the adoption of Internet of Things (loT) technologies and sensor-based technologies such as RFID has contributed to boosting the connected logistics market. Furthermore, there is a huge opportunity to leverage advanced connected logistics management on Indias upcoming 5G network. With ultra-high bandwidth, extremely low latency, massive capacity and increased government focus, 5G is expected to significantly improve connectivity.

• Eco-logistics: Eco-logistics or green logistics involves the use of more eco-friendly and sustainable processes in order to reduce the impact of logistics on our environment. The adoption of sustainable processes will be one of the vital trends for future growth.

• Legal environment and government reforms: Implementing GST, the Logistics Efficiency Enhancement Programme (LEEP), increasing the pace of building expressway and highway infrastructure and bringing reforms to axle load limits have benefited the organised logistics sector. Furthermore, the Ministry of Commerce set up a logistics division in July 2017 to oversee the sectors integrated development. Some of the other initiatives undertaken by the government are:

• The government launched the national master plan PM Gati Shakti initiative, a multi-modal connectivity for all infrastructure projects with seven engines (roads, railways, airports, ports, mass transport, waterways, and logistics infrastructure). In the interim budget 2024, the government announced three major economic railway corridor programmes: energy, mineral and cement corridor, port connectivity corridor, and high traffic density corridor, to enable multi-modal connectivity to improve logistics and reduce costs. This infrastructure development will likely result in a decrease in the countrys logistics cost and enhance the ease of living and doing business in the country.

• The government launched the National Logistics Policy (NLP) in September 2022 with the targets to (i) reduce the cost of logistics in India to be comparable to global benchmarks by 2030; (ii) improve the LPI ranking - the endeavour is to be among the top 25 countries by 2030, and (iii) create a data-driven decision support mechanism for an efficient logistics ecosystem.

These measures have facilitated a fast and smooth flow of goods, reduced turnaround times and enabled logistics companies to invest in building large-scale and efficient infrastructure.

Key challenges ahead for logistics industry

• Fragmented supply chain: The logistics industry in India is highly fragmented, with numerous small players operating independently across supply chain segments. This fragmentation results in suboptimal resource utilisation, lack of standardisation, and difficulties in coordination and collaboration among stakeholders. Consolidating and integrating logistics operations by adopting technology platforms and establishing logistics parks and hubs can help overcome fragmentation. Such initiatives would streamline operations, improve efficiency, and cut costs through economies of scale.

• Rising fuel prices: Fuel accounts for a significant portion of the logistics service providers transportation costs. The cost of diesel in India depends on international crude oil prices as India imports most of its fuel requirements. The fluctuations in fuel prices can dramatically impact the logistics industry margins, impacting each stakeholder in the value chain. The rapid increase in fuel price can delay and substantially impact the operations of logistics companies, forcing them to raise prices or take losses. A sudden fall could result in short-term boosts in profit and a surge of competition within the market to provide consumers with a lower price. Many logistics companies mitigate this risk by linking customer contracts to fuel prices.

• Truck driver shortage: Potential drivers may find the profession unattractive due to the lack of security and safety, harsh working conditions, irregular working hours, and long hours away from their families. With significant improvement in road infrastructure coupled with new technologies such as ADAS which ensures higher safety, the working conditions for the drivers are improving.

• Reverse logistics cost: Indias e-commerce sector is growing at a rapid pace driven by increased consumer incomes and smartphone penetration. However, one major challenge in the e-commerce sector is the logistics cost. Customers may decide to return the parcels for various reasons. These reverse logistics result in additional complexity in the operations and put an additional cost

on the sellers, thus affecting the potential growth of the logistics industry.

• Last-mile connectivity: The last-mile delivery segment of the logistics chain, encounters challenges such as manpower availability, inadequate road infrastructure, traffic congestion, poor address mapping and weather related disruptions. These factors contribute to delays, higher costs, and lower customer satisfaction, especially for ecommerce and FMCG companies reliant on timely deliveries. Improving last-mile connectivity through initiatives such as digital mapping technologies, alternate delivery modes, and different vehicle types would optimise delivery routes, shorten transit times and enhance service reliability, thus improving the overall customer experience.

Consolidated financial performance

Analysis of our financial performance for the current and previous financial year is provided below:

(Rs. in Million)

Particulars	March 31, 2024 1	March 31, 2023
Revenue from contracts with customers	81,415.38	72,253.01
Other income	4,526.96	3,049.48
Total income	85,942.34	75,302.49
Freight, Handling and Servicing Costs	59,707.49	56,694.80
Change in inventory of traded goods	-	15.76
Employee benefits expense	14,367.70	14,000.34
Other expenses	6,073.78	6,058.19
Depreciation and amortisation expense	7,215.50	8,311.44
Finance costs	885.20	888.30
Profit/(Loss) before exceptional items, share of profit of an associate and tax	(2,307.33)	(10,666.34)
Share of profit/(loss) of associate (net)	86.95	135.74
Exceptional items	(224.10)	-
Profit/(Loss) before tax	(2,444.48)	(10,530.60)
Tax expense	47.38	(452.81)
Profit/(loss) for the period/year	(2,491.86)	(10,077.79)
EBITDA	1,266.41	(4,516.08)
Adjusted EBITDA1	757.86	(4,038.66)

1 Refer to adjusted EBITDA section below for details

Revenue by service lines

We provide a full range of logistics services, including express parcel delivery, part truckload (PTL) freight, truckload (TL) freight, supply chain solutions, and cross-border express and freight services. Our service lines are reported as one combined segment—Logistics Services—as per Ind AS 108.

Particulars	March 31, 2024 1	% share	March 31, 2023	% share
Revenues from express parcel services	50,765.87	62.35%	45,522.22	63.00%
Revenues from part truckload services	15,174.05	18.64%	11,565.38	16.01%
Revenues from truckload services	6,087.96	7.48%	4,362.17	6.04%
Revenues from supply chain services	7,760.29	9.53%	7,817.47	10.82%
Revenues from cross-border services	1,525.31	1.87%	2,957.68	4.09%
Others	101.90	0.13%	11.55	0.02%
Revenues from sale of traded goods		-	16.54	0.02%
Total revenues from customers	81,415.38	100.00%	72,253.01	100.00%

Performance highlights

• Total income increased by 14.13% to Rs.85,942.34 million for FY24 from Rs.75,302.49 million for FY23. Revenues from customers increased by 12.68% to Rs.81,415.38 million for FY24 from Rs.72,253.01 million for FY23.

• Revenues from express parcel services increased by 11.52% to Rs.50,765.87 million for FY24 from Rs.45,522.22 million for FY23. Express parcel shipment volumes increased by 11.48% to 740 million parcels for FY24 from 663 million parcels for FY23.

• Revenues from PTL services increased by 31.20% to Rs.15,174.05 million for FY24 from Rs.11,565.38 million for FY23. PTL volumes increased by 29.82% to 1,429Ktonnes for FY24 from 1,101K tonnes for FY23.

• Revenues from TL services increased by 39.56% to Rs.6,087.96 million for FY24 from Rs.4,362.17 million for FY23.

• Revenues from supply chain services decreased by 0.73% to Rs.7,760.29 million for FY24 from Rs.7,817.47 million for FY23.

• Revenues from cross-border services decreased by 48.43% to Rs.1,525.31 million for FY24 from Rs.2,957.68 million for FY23.

• Loss for the year decreased to Rs.2,491.86 million for FY24 from Rs.10,077.79 million for FY23.

Operating costs

We continue to achieve cost efficiency in our operations

through process improvements, increasing scale and

continued integration of our various logistics service offerings.

Key components of our operating costs include:

Freight, handling and servicing costs

Our freight, handling and servicing costs increased by 5.31% to

Rs.59,707.49 million for FY24 from Rs.56,694.80 million for FY23

due to an increase in express parcel volumes, PTL tonnage, network expansion and inflation. Due to increased network utilisation and our continuous cost optimisation measures, our freight, handling and servicing costs decreased as a percentage of revenue from contracts with customers to 73.34% for FY24 from 78.47% for FY23.

Employee benefits expenses

Our employee benefits expenses increased by 2.62% to Rs.14,367.70 million for FY24 from Rs.14,000.34 million for FY23. The increase was on account of increase in our employee headcount and increments paid to existing employees. Our employee benefits expense decreased as a percentage of revenue from contracts with customers to 17.65% for FY24 from 19.38% for FY23.

Other expenses

Other expenses include allowances for doubtful debts, travelling and conveyance, cash management service charges, software and technology cost, and repairs and maintenance. Other expenses increased by 0.26% to Rs.6,073.78 million for FY24 from Rs.6,058.19 million for FY23 due to increase in operating volumes. However, other expenses, as a percentage of revenue from contracts with customers, decreased to 7.46% for FY24 from 8.38% for FY23.

Other costs

Depreciation and amortisation expenses

Our depreciation and amortisation expenses decreased by 13.19% to Rs.7,215.50 million for FY24 from Rs.8,311.44 million for FY23, primarily due to a 56.57% decrease in amortisation expense on intangible assets to Rs.1,000.31 million for FY24 from Rs.2,303.43 million for FY23.

Finance cost

Our finance cost decreased by 0.35% to Rs.885.20 million for FY24 from Rs.888.30 million for FY23, primarily due to a reduction in availed banking facilities during FY24.

Adjusted EBITDA

In evaluating our business, we consider and use adjusted EBITDA. This non-GAAP measure eliminates non-cash, non-recurring or non-operating items and thus acts as a measure of the recurring operating profitability of our business. Adjusted EBITDA helps us identify underlying trends in our business economics and facilitates evaluating operating performance by eliminating non-cash, non-recurring or non-operating items over multiple periods. This approach provides valuable information about our operating results, enhances the overall understanding of our past performance and prospects, and allows for greater transparency concerning crucial metrics which we use for financial and operational decision making. The table below summarises our total revenues from contracts with customers, expenses and calculation of EBITDA and adjusted EBITDA-.

(Rs. in Million)

Particulars	March 31, 2024 1	March 31, 2023	Remarks
Revenues from contracts with customers	81,415.38	72,253.01
Less: Freight, Handling and Servicing Costs	59,707.49	56,694.80
Less: Change in inventory of traded goods	-	15.76
Less: Employee benefits expense	14,367.70	14,000.34
Less: Other expenses	6,073.78	6,058.19

(Rs. in Million)

Particulars	March 31, 2024 1	March 31,2023	Remarks
EBITDA	1,266.41	(4,516.08)
Add: Share-based payment expenses	2,260.37	2,891.41	Accounting expenses towards ESOPs and SARs already granted
Add: IPO expenses	-	164.77	IPO related non-operating expenses
Less: Actual lease rent paid	2,768.93	2,578.76	Actual cash rent paid on leased properties recognised under Ind AS 116
Adjusted EBITDA	757.86	(4,038.66)
Adjusted EBITDA margin	0.93%	(5.59%)

Note: Excluding share of profit/(loss) of associates

Our EBITDA and adjusted EBITDA increased significantly during FY24 over FY23 primarily due to robust growth in revenues from express parcel, PTLand TL services, better network utilisation, improvement in profitability of supply chain services and the continuous cost optimisation measures adopted throughout the year.

Key financial ratios

Key financial ratios for the current and previous financial year are provided below:

		March 31, 2024 1	March 31,2023
Remarks
EBITDA margin	1.56%	(6.25%)	EBITDA margin measures a companys operating profit as a percentage of revenue from customers. Our EBITDA margin expanded by 781 bps from FY23 to FY24 due to (i) robust growth in revenues from express parcel, PTL and TL services, (ii) better network utilisation, (iii) improvement in profitability of supply chain services, and (iv) the continuous cost optimisation measures adopted throughout the year.
Net profit margin	(2.90%)	(13.38%)	Net profit margin measures a companys net profit as a percentage of its total income. Our net profit margin increased by 1,048 bps in FY24 primarily on account of (i) improvement in operating margins, (ii) reduction in depreciation and amortisation expense, and (iii) increase in other income.
Debt-equity ratio	0.01	0.02	Debt-equity ratio measures a companys financial leverage, calculated as division of total borrowings by total shareholders equity. Our debt-equity ratio improved in FY24 on account of reduction in availed banking facilities during FY24.
Receivables turnover!1)	5.31	4.45	Receivables turnover measures a companys effectiveness in collecting receivables from its customers and is calculated by dividing total revenue by average trade receivables. The receivables turnover ratio improved during FY24 due to significant measures taken by us to improve billing and collections across our businesses.
Current ratio	4.42	5.33	The current ratio measures a companys ability to meet its shortterm obligations and is calculated by dividing current assets by current liabilities. Our current ratio decreased during FY24 due to a 14.55% reduction in current assets due to a reduction in trade receivables, other financial assets, and other bank balances and a 3.16% increase in current liabilities due to an increase in lease liabilities, trade payables and other financial liabilities.
Return on networth	(2.72%)	(13.32%)	Return on networth measures a companys profitability and is calculated by dividing profit aftertax by average shareholders equity. The improvement in return on networth from FY23 to FY24 was primarily due to an improvement in profit after tax. Profit after tax increased by Rs.7,585.93 million from Rs.(10,077.79) million in FY23 to Rs.(2,491.86) in FY24.
Inventory turnover ratio	n/a	n/a	The inventory turnover ratio measures a companys effectiveness in converting its inventory into sales and is calculated by dividing total revenue by average inventory. Since we are a service company and do not manufacture goods for sale, our inventory comprises items for internal consumption only. It is not raw materials inventory for production or finished goods inventory for sale. Therefore, and the inventory turnover ratio does not apply to us.
Interest coverage ratio	1.43	n/a	The interest coverage ratio measures a companys ability to meet its interest obligations on its outstanding debt from its earnings before interest, tax, depreciation and amortisation (EBITDA) and is calculated by dividing EBITDA by interest expense. We had an EBITDA loss for FY23 and therefore the interest coverage ratio is not meaningful for FY23.

Capital expenditure

We operate an asset-light business model wherein we extend our logistics services by enabling network partners such as fleet owners, franchisees, retail partners and delivery agents to provide us access to their physical assets and resources such as infrastructure and fleet. Therefore, we do not incur any capital expenditure towards owning real estate and own only a part of the fleet that is deployed in our network. Our capital expenditure is towards investing in fit-out infrastructure, state-of-the-art automation and IT assets and tractor-trailers. Automation includes parcel sorter systems, bag sortation systems, conveyance systems and future-ready technologies such as AGVs, ASRS and UAV. Such investments enable us to achieve further speed, efficiency and precision in our operations. During FY24, we capitalised Rs.6,014.07 million of property, plant and equipment and intangible assets excluding any disposals. Capital work in progress was Rs.285.59 million, and intangible assets under development were Rs.0.26 million at the end of FY24.

Some of the major capital expenditure projects we undertook during FY24 include:

• Commissioned the new gateway - at Lonad, Bhiwandi in Maharashtra, which is our largest mega-gateway, spread across 1.2 million square feet.

• Expanded the gateway in Medchal, Flyderabad increasing its processing capacity from 40,000 bags per day to 1.4 lakhs bags per day.

• Deployed 150 additional tractors (46-ft) to further increase the share of tractor-trailer capacity in our linehaul network.

We funded the capital expenditure mainly through internal accruals and available cash.

Inorganic investments

We intend to do selective investments, acquisitions and other strategic initiatives within and outside India, which complement our product and service offerings, enable us to build new capabilities, strengthen or establish our presence in our target markets, and allow us to access technology.

During FY24, we undertook the following acquisitions and investments:

• We acquired a minority stake in Vinculum Solutions Private Limited for a consideration of Rs.250 million in July 2023 to scale up our SaaS offerings for our D2C customers.

• We have increased our stake in Falcon Autotech Private Limited by 4.79% for a consideration of Rs.500.40 million, thereby taking our overall stake in Falcon to 39.34% on a fully dilutive basis. Falcon is engages in the business of designing, manufacturing, supplying, implementing and maintaining warehouse automation systems in India.

Liquidity

We continue to remain extremely well capitalised, which we believe, is a significant competitive advantage in a high- growth logistics market like India. As of the end of FY24, we had cash of Rs.54,438.67 million, which included cash and cash equivalents, bank balances, investments, margin money deposits, and deposits with original maturity of >12 months. A significant portion of our cash is invested in low- risktreasury investments such as fixed deposits, debt mutual funds, debentures and bonds. We will continue to deploy cash for organic and inorganic growth in our business.

Borrowings

We have borrowed from financial institutions to purchase vehicles for our working capital requirements and general corporate purposes. As of the end of FY24, we had outstanding borrowings of Rs.1,255.98 million. Our debt-equity ratio was 0.01.

Corporate social responsibility

We undertook CSR activities voluntarily during FY24, though we were not required to spend any amount on CSR activities during FY24, given the absence of profits during the three immediately preceding financial years. We contributed Rs.10 million towards Olympic Gold Quest, an initiative under the Foundation for Promotion of Sports and Games. Additionally, we contributed Rs.0.35 million towards facilitating training and participation of undergraduate students in squash. We contributed Rs.1.56 million to 25 female students from low- income households towards their preparation for engineering and medical entrance examinations to undergraduate courses and Rs.0.93 million towards preventive healthcare. Refer to Annexure-4 of the Directors Report for more details on our Companys CSR activities.

Risks/threats to the industry and our business

The logistics industry, including Delhivery, faces numerous risks that can impact our business in various ways:

1 Political, macroeconomic and demographic changes could adversely affect Indias economic conditions, thus impacting the logistics industry. Since we derive most of our revenue from contracts with customers in India, such risks may impact our earnings.

2 Although we continue to diversify our customer base, e-commerce customers contribute significantly to our volume and revenue. Accordingly, our business growth is related to e-commerce and, more generally, commerce in India. Due to the nature of the industry, a significant portion of our business is driven by a few large customers across multiple services they obtain from us. Their future actions, including decisions related to their strategy on outsourcing their platform volumes to logistics partners, may adversely impact our business.

3 Natural disasters, epidemics, pandemics, acts of war, geopolitical tensions, terrorist attacks, and other events could materially and adversely impact the industry, and hence, our business and operations.

4 Any disruption to our logistics and transportation facilities could impact our business operations and, hence, our cash flows.

5 Rising fuel prices and inflationary pressures on wages and assets can impact our cash flows and profitability.

6 Inability to attract and retain suitably qualified and skilled employees, labour unrest or union activities, increase in the costs of labour or failure to comply with applicable labour laws could negatively affect our operations and earnings.

7 As our proprietary technology infrastructure is critical to our operations, any disruptions to our technology infrastructure could impact our business operations.

8 Reliance on partners and other third parties for certain aspects of our business such as first, mid, and last mile services, contractual manpower, and fleet, poses risks to our operations and financial condition.

9 Anydeficiencyin Indiasroad network, telecommunication, internet, air cargo and airport infrastructure could impact our business operations and technology systems.

10 Changes in the taxation system in India could adversely impact our business, thus impacting our cash flows and financial condition.

Internal control systems

A robust internal controls framework has been documented and implemented across our business processes. Our internal control systems are commensurate with the nature of our business and the size and complexity of our operations. These controls seek to provide reasonable assurance regarding the maintenance of proper accounting controls for ensuring orderly and efficient conduct of our business, monitoring of operations, reliability of financial reporting, accuracy and completeness of the accounting records, timely preparation of reliable financial information, protecting assets from unauthorised use or losses, prevention and detection of frauds and errors and compliances with regulations.

The Audit Committee, composed of Independent and Non- Executive Directors, regularly reviews significant audit findings, adequacy of internal controls, audit plans, and reasons for changes in accounting policies and practices, if any, and monitors the implementation of audit recommendations. The management annually tests controls design and operating effectiveness with the support of external consultants, whom the statutory auditors later audit. We carry out control testing per the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). Our internal audit department further evaluates the internal control system through internal audits and reviews by an in-house audit team and third-party internal audit firms like PricewaterhouseCoopers Services LLP. Internal auditors validate the preventive and detective controls embedded in all the business processes. Significant audit observations and follow-up actions thereon are reported to the Audit Committee.

Developments in human resources

We undertook a host of initiatives through FY24 to ensurethat the work environment fosters high performance, inclusivity, respect and empathy and provides opportunities for growth and development.

We increased the headcount of women employees by 59% across functions and positions. We identified specific roles that presented opportunities to enhance gender diversity and made a concerted effort to increase the ratio of women in these teams.

We expanded the reach and increased the frequency of the Delhivery Skills Development Programme (SDP). The programme, which is aimed at providing an opportunity to freshers and first-time job seekers across the country to get trained and start a career in logistics with Delhivery, was transitioned into a monthly training programme. During FY24, we received 27,618 registrations and 588 candidates were eventually hired on successful completion of the training.

We continued to train our employees to develop the knowledge, skills, and abilities needed for continued growth and success in their roles. Depending on business and operational requirements, different teams received different types of training. In FY24, we trained 12,104 employees across different teams. As a result of our continuous training initiatives and employee performance, we promoted over 3,500 team members from off-roll to permanent positions.

We continued to conduct regular town halls and all-hands meetings to ensure transparent communication and a steady stream of two-way communication between the employees and the organisations leadership. The well-being of our employees has always been a key focus area at Delhivery. We launched multiple initiatives this year across our operational facilities and corporate offices, like weekly fitness sessions and interdepartmental sports events to promote our employees physical and mental wellness.

These initiatives are detailed further as part of this Annual Reports Our People section.

Cautionary statement

Statements in this Management Discussion and Analysis and this Annual Report describing the Companys vision, projections, estimates, expectations, plans or predictions or industry conditions or events may be forward-looking statements within the meaning of applicable securities laws and regulations. Actual results, performance or achievements could differ materially from those expressed or implied. Several factors could make a significant difference to the Companys operations. These include economic conditions affecting demand and supply, government regulations and taxation, natural calamities, and pandemics over which the Company has no direct control.