Swiggy’s Initial Public Offering (IPO) Opens for Subscription
In a significant development for the Indian food delivery sector, Swiggy has launched its Initial Public Offering (IPO), which is now open for subscription until November 8. This marks a pivotal moment for the company as it seeks to raise approximately Rs 11,300 crore, albeit at a revised valuation of $11.3 billion, down from its earlier target of around $15 billion.
IPO Structure and Pricing
The Swiggy IPO consists of a fresh equity sale amounting to Rs 4,499 crore, alongside an offer for sale (OFS) of 17,50,87,963 equity shares. The company has set the price band for its shares between Rs 371 and Rs 390. Investors can bid for a minimum of 38 shares in one lot, with the option to apply for additional lots in multiples of 38.
Grey Market Premium (GMP)
As the IPO opened, Swiggy’s shares were trading in the unlisted market with a Grey Market Premium (GMP) of Rs 12, indicating a modest premium of about 3% over the upper end of the issue price. This early indication suggests a cautious optimism among investors regarding the company’s market debut.
Analyst Perspectives
The response from analysts regarding Swiggy’s IPO has been mixed. Some experts express concerns about the company’s financial health and competitive landscape, particularly in light of its ongoing losses. "As of the fiscal year 2024, Swiggy continues to operate at a loss, in contrast to its competitor, Zomato, which has recently achieved profitability," noted Samco Securities. They advise potential investors to avoid the IPO until Swiggy can demonstrate improved financial performance and a clearer growth trajectory.
Conversely, SBI Securities offers a more optimistic view, suggesting that Swiggy’s valuation metrics—Price/Sales, EV/Sales, and P/BV multiples—are fairly priced compared to Zomato. They recommend subscribing to the IPO for long-term investment, highlighting the growth potential in the food delivery market.
Financial Performance and Future Plans
Swiggy’s financial history reveals a challenging landscape. The company has reported net losses each year since its inception, with the loss for the financial year ending March 2024 standing at Rs 2,350 crore, a reduction from Rs 4,179 crore in FY23 and Rs 3,628 crore in FY22. However, revenue from operations has shown promising growth, doubling to Rs 11,247 crore in FY24 from Rs 5,704 crore in FY22.
The proceeds from the IPO are earmarked for strategic investments, including enhancing its material subsidiary, Scootsy, bolstering technology and cloud infrastructure, and ramping up brand marketing and business promotion over the next four to five years. This strategic focus is essential as Swiggy competes with Zomato in the burgeoning online restaurant and food delivery sector, both companies betting on the rapid growth of "quick-commerce," which promises deliveries of groceries and other products within 10 minutes.
Conclusion
As Swiggy embarks on this journey to go public, the IPO presents both opportunities and challenges for investors. While the potential for growth in the food delivery space is significant, the company’s current financial performance and competitive pressures warrant careful consideration. Investors are encouraged to weigh the long-term prospects against the backdrop of Swiggy’s financial health and market dynamics before making investment decisions.
With leading financial institutions like Kotak Mahindra Capital, Citigroup Global Markets, Jefferies India, and Avendus Capital serving as book running lead managers, and Link Intime India acting as the registrar to the issue, Swiggy’s IPO is poised to attract considerable attention in the coming days. As the subscription period unfolds, market participants will be keenly observing how this pivotal event shapes the future of one of India’s most prominent food delivery platforms.