Shadowfax is scaling rapidly, improving margins, and entering the market at a sharp discount to listed peer Delhivery. But its investment case is complicated by heavy client concentration. Is the trade-off worth it?
India’s fastest-growing third-party logistics (3PL) company, Shadowfax, is set to tap the capital markets through an initial public offering (IPO) that opens on 20 January. The company aims to raise ₹1,907 crore, offering investors exposure to a technology-led logistics platform serving e-commerce and quick commerce—at a valuation that remains modest relative to listed peer Delhivery.
The issue, priced at ₹118–124 per share, comprises a fresh issue of ₹1,000 crore and an offer-for-sale of ₹907 crore by existing investors, including Flipkart ( ₹400 crore) and Qualcomm ( ₹65.4 crore). At the upper end of the price band, Shadowfax’s implied market capitalization stands at ₹7,169 crore, significantly lower than Delhivery’s ₹30,049 crore.
Of the net proceeds, the company plans to deploy ₹423.4 crore towards network infrastructure expansion, ₹138.6 crore towards lease payments for new centres, and ₹88.6 crore for branding, marketing, and communication. The balance will be used for inorganic acquisitions and general corporate purposes.
From an investor’s standpoint, this allocation underscores a strategy focused on capacity-led growth and brand building to deepen network scale. The larger question, however, is how Shadowfax stacks up operationally and financially as it enters the public markets.
A tech-led, crowdsourced logistics platform
Shadowfax operates a technology-led 3PL platform offering end-to-end e-commerce logistics as well as last-mile hyperlocal delivery. It is the only 3PL player of scale in India to combine both capabilities within a single network. Its client roster includes Meesho, Flipkart, Zomato, and Magicpin, with most customers using multiple service lines—driving strong retention and wallet share.
This positioning has helped Shadowfax emerge as the fastest-growing 3PL player as of 31 March 2025. Its share of India’s e-commerce shipments rose sharply from 8% in FY22 to 23% as of 30 September 2025. The company is also the largest 3PL player in reverse pickup and same-day delivery by order volume, supported by the country’s largest crowdsourced last-mile delivery fleet among e-commerce logistics players.
Client concentration: the key risk
Despite its scale-up, Shadowfax remains heavily dependent on a small set of clients. Its largest customer accounted for 48% of total operating revenue in FY25. The top five clients—including Meesho, Flipkart, and Zepto—contributed 75% of revenue, while the top ten accounted for 86%. Group company Flipkart alone made up 12% of revenue during the year.
This level of concentration poses risks to both revenue stability and pricing power.
The risk is not theoretical. A similar dynamic played out at Ecom Express (since acquired by Delhivery), where Meesho once accounted for more than half of shipment volumes. When Meesho later launched its in-house logistics arm, Valmo, volumes fell sharply. The fixed-cost-heavy model at Ecom Express led to rapid operating deleverage and mounting losses—an outcome investors will be wary of repeating.
The delivery partner engine
As of September 2025, Shadowfax had 205,864 average quarterly unique transacting delivery partners operating across more than 2,300 cities and 14,785 pin codes. This vast gig-based workforce is central to the company’s ability to scale quickly and flex capacity.
Correspondingly, partner-related expenses have risen sharply, reaching ₹1,350 crore in FY25, up from ₹769 crore in FY23. In H1FY26, these costs stood at ₹956 crore, compared with ₹565 crore in H1FY25. Any disruption to this delivery partner network could materially affect service levels and growth.
Shadowfax follows an asset-light operating model, leasing all trucks and properties from third-party fleet owners. It deploys an average fleet of over 3,000 trucks per day, which is interoperable across Express and Hyperlocal services. This flexibility improves asset utilisation and helps control costs.
The leverage from this model is visible in volume growth. Order volumes rose from 259 million in FY23 to 437 million in FY25, and further to 294 million in H1FY26, up from 196 million in H1FY25.
Express services drive scale
The company’s Express segment, which primarily serves e-commerce platforms, remains its core growth engine. The offering includes faster parcel delivery along with value-added services such as reverse logistics, exchanges, and priority delivery.
In FY25, Express orders accounted for 78% (342 million) of the total 437 million orders processed. This share remained stable in H1FY26 at 77.6% (228 million of 294 million orders). The balance came from Hyperlocal services, catering to quick commerce, food delivery, and on-demand logistics.
While Express dominates volumes, Hyperlocal is scaling faster. Hyperlocal orders nearly doubled to 95 million in FY25 from 49 million in FY23, and increased to 66 million in H1FY26 from 36 million in H1FY25.
Revenue mix mirrors volumes
Express services also dominate the revenue mix, contributing 69% of total revenue in FY25, followed by Hyperlocal (21%) and other logistics services (10%). Express revenue rose from ₹1,035 crore in FY23 to ₹1,716 crore in FY25, while Hyperlocal revenue nearly doubled from ₹255 crore to ₹513 crore over the same period.
Revenue from other logistics services also doubled, rising from ₹125 crore to ₹256 crore. Overall, revenue expanded to ₹2,485 crore in FY25 from ₹1,415 crore in FY23.
Momentum has continued into FY26, with H1FY26 revenue reported at ₹1,806 crore, pointing to a sharp step-up in the full-year trajectory. At the current run rate, full-year revenue could exceed ₹3,500 crore. Growth has also been supported by a near doubling of reach, with pin codes served increasing to 14,758 from 7,955 in FY23.
Inside the capex push
Shadowfax’s unified logistics network—comprising 90 first-mile and return-to-seller centres, 53 sortation centres, and 4,156 last-mile centres—represents its largest cost base. Logistics-related additions to property, plant, and equipment accounted for 80% of total capital expenditure as of September 2025.
Any under-absorption of this expanded network could pressure margins and result in operating losses. The remaining capex is directed towards technology infrastructure that underpins the company’s integrated operations.
The company uses a mix of short-term (11 months) and long-term leases (over 11 months, extending up to nine years). While short-term leases carry renewal risk and potentially higher costs, Shadowfax has gradually reduced its reliance on them. Short-term lease expenses declined from ₹51 crore in FY23 to ₹47 crore in FY25.
At the same time, depreciation expenses from capitalised lease assets have increased fivefold, from ₹7 crore to ₹35 crore, reflecting network expansion through longer-term lease commitments.
From scale to profitability
Operating leverage has begun to play out as volumes increased. Adjusted Ebitda margins improved sharply to 1.96% in FY25 from negative 7.18% in FY23, and further to 2.86% in H1FY26. On a full-year basis, margins are already higher than Delhivery’s 1.65%, indicating improving efficiency at current scale.
This has translated into sustained operating profitability. Shadowfax has been Ebitda-positive since FY24, reporting ₹19 crore that year, which rose to ₹49 crore in FY25 and further to ₹52 crore in H1FY26, up from ₹26 crore in H1FY25.
Profitability has also flowed through to the bottom line. The company reported a net profit of ₹6 crore in FY25, compared with losses of ₹12 crore and ₹14 crore in the preceding two years. Net profit strengthened further to ₹21 crore in H1FY26 from ₹10 crore in H1FY25.
Operating cash flow improved meaningfully, rising to ₹141 crore in H1FY26 from ₹50 crore in FY25. Cash and cash equivalents, however, increased only marginally to ₹171 crore from ₹162 crore, reflecting continued deployment towards expansion.
Valuation: growth at a discount?
At a market capitalization of ₹7,169 crore, Shadowfax’s IPO is priced at a price-to-sales multiple of 2.2 times—lower than Delhivery’s 3.2 times, reflecting the latter’s larger scale. In return, investors are getting faster revenue growth and early-stage profitability.
The trade-off lies in client concentration. While Shadowfax’s operating metrics are improving, its dependence on a handful of large customers remains the central risk investors must weigh when evaluating whether the valuation discount adequately compensates for that exposure.
For more such analysis, read Profit Pulse
Madhvendra has over seven years of experience in equity markets and writes detailed research articles on listed Indian companies, sectoral trends, and macroeconomic developments.
The writer does not hold the stocks discussed in this article.
The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.
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