Swiggy IPO: A Comprehensive Overview of the Much-Awaited Public Offering
The Indian food delivery giant Swiggy has officially opened its Initial Public Offering (IPO) for bidding on November 6, 2024, marking a significant milestone in its journey towards becoming a publicly traded company. With a target to raise ₹11,327.43 crore through a combination of fresh share sales and an offer for sale, the IPO is poised to attract considerable attention from investors. The bidding will remain open until November 8, 2024, with share allotment expected to be finalized by November 11.
Subscription Status and Investor Interest
On its opening day, the Swiggy IPO saw a subscription rate of 12%. Retail investors showed a moderate interest, booking the issue 0.56 times, while the employee segment was fully subscribed. The non-institutional investors (NIIs) and qualified institutional buyers (QIBs) displayed a lackluster response, with subscriptions at 0.10 times and no bids, respectively. As of November 7, the subscription rate increased to 24%, with retail buyers booking the issue 0.75 times and the employee section fully subscribed.
Pricing and Allotment Details
The IPO price band has been set between ₹371 and ₹390 per equity share, making it accessible for a wide range of investors. The minimum investment for retail investors is approximately ₹14,820 for a lot size of 38 shares. Notably, Swiggy has reserved 750,000 shares for its employees, offered at a discount of ₹25 from the issue price, which reflects the company’s commitment to its workforce.
Financial Performance and Market Position
Swiggy’s financial trajectory has been a mixed bag. In FY24, the company reported a revenue of ₹3,222.2 crore, marking a year-on-year growth of 34.8%. However, it also recorded a negative profit after tax (PAT) of ₹611 crore. Over the past three fiscal years, Swiggy has consistently reported losses, raising concerns among potential investors. The total income for FY22 was ₹6,119.78 crore, with a net loss of ₹3,628.90 crore, which increased to ₹4,179.31 crore in FY23 despite a rise in total income to ₹8,714.45 crore. The trend continued in FY24, where total income rose to ₹11,634.35 crore, but the net loss was still significant at ₹2,350.24 crore.
Analyst Opinions and Recommendations
Market analysts have varied opinions on the Swiggy IPO. Aditya Birla Money has recommended an "Avoid" stance due to reported negative cash flows and ongoing losses, alongside a relatively high valuation of 7.7x FY24 price-to-sales. Conversely, some analysts, like those from Mehta Equities, believe that Swiggy’s expansion into Tier 2 and Tier 3 cities, along with its diversification into groceries and medicines, positions it well for future profitability. They recommend subscribing to the IPO for a long-term perspective.
Competitive Landscape
Swiggy’s IPO comes at a time when the online food delivery market in India is expected to grow significantly, projected to reach ₹1,400-1,700 billion by 2028. The competition with Zomato, another major player in the sector, is intense. At the upper price band, Swiggy’s valuation could touch ₹95,000 crore, which is substantially lower than Zomato’s current market cap of ₹2.25 lakh crore. This competitive landscape raises questions about Swiggy’s ability to capture market share and achieve profitability.
Key Risks and Strengths
Investors should consider both the risks and strengths associated with Swiggy. Key risks include the ongoing net losses, dependence on third-party providers, and fierce competition in the food delivery and quick commerce sectors. On the other hand, Swiggy’s strengths lie in its pioneering role in hyperlocal commerce, a robust user network, and a unified app that enhances user experience. The company has also demonstrated consistent growth in average order value and user engagement, which are positive indicators for its future.
Conclusion
The Swiggy IPO represents a pivotal moment for the company as it seeks to solidify its position in the competitive food delivery market. With a substantial fundraising target and a mixed financial outlook, potential investors are advised to weigh the risks against the growth potential. As the IPO progresses, it will be interesting to see how investor sentiment evolves and whether Swiggy can leverage its strengths to navigate the challenges ahead. The final allotment and listing dates will be closely watched as they will provide further insights into the market’s reception of this high-profile offering.