Swiggy’s IPO debuted at ₹420 on the NSE, opening 7.7% above its issue price. It was oversubscribed by 3.59 times, showing strong interest from institutional investors. Swiggy intends to use the raised funds to fuel its expansion, upgrade technology, and boost marketing efforts.
Swiggy’s IPO made a solid market debut on Wednesday, November 13, with shares listing at ₹420 on the NSE, a 7.7% premium over the issue price of ₹390. On the BSE, shares opened at ₹412, marking a 5.64% gain.
Swiggy’s IPO, valued at₹11,327.43 crore, was available for subscription from November 6 to November 8, with shares priced between ₹371-390. The offering attracted strong demand, closing at 3.59 times oversubscribed, with 57.53 crore bids for the 16 crore shares on offer. Retail investors subscribed 1.14 times, while the non-institutional investor (NII) category lagged slightly at 0.41 times. The strongest response came from qualified institutional buyers (QIBs), who subscribed 6.02 times. Additionally, the employee quota was booked at 1.65 times.
About IPO
Swiggy’s IPO included a fresh issue of 11.54 crore shares, raising ₹4,499 crore, along with an offer for sale of 17.51 crore shares, totaling ₹6,828.43 crore. As a result, promoter shareholding will decrease from 63.56% to 52.97%. Ahead of the IPO, Swiggy secured ₹5,085 crore from anchor investors on November 5, 2024. The minimum lot size for retail investors was 38 shares, requiring an investment of ₹14,820.
The company has strategic plans for the net proceeds. Key allocations include investment in Scootsy, a material subsidiary, to manage debt repayment and to fund its Quick Commerce expansion through Dark Stores and associated lease costs. Swiggy also aims to strengthen its technology and cloud infrastructure and will invest in brand marketing across various segments to amplify its platform’s reach. Additionally, a portion of funds is reserved for potential acquisitions to drive growth, alongside general corporate purposes.
Swiggy has reserved 7,50,000 equity shares, worth ₹29.25 crore, for eligible employees, offering a ₹25 per share discount as part of its IPO. Of the net offer, 75% is allocated to qualified institutional bidders (QIBs), while non-institutional investors (NIIs) and retail investors are set to receive 15% and 10% of the net offer, respectively.
The Swiggy IPO was managed by several leading financial institutions, with Kotak Mahindra Capital Company Limited, Citigroup Global Markets India Private Limited, Jefferies India Private Limited, Avendus Capital Pvt Ltd, J.P. Morgan India Private Limited, Bofa Securities India Limited, and ICICI Securities Limited serving as the book-running lead managers. Link Intime India Private Ltd acted as the registrar for the IPO.
Brokerage Insights
Ahead of Swiggy’s much-anticipated market debut, which saw subscriptions exceed threefold, brokerages have been weighing in. Macquarie issued an ‘underperform’ rating with a target price of ₹325, suggesting a potential 17% downside from the IPO price. While the brokerage acknowledged Swiggy’s strong growth potential, the company’s journey to profitability may face challenges.
As India’s second-largest app for food delivery, quick commerce, and out-of-home services, Swiggy shows potential to close the gap with market leader Zomato. However, Macquarie highlighted that the quick commerce segment presents significant challenges, with no clear path to sustainable profitability.
Macquarie projects that Swiggy could reach EBIT breakeven by FY28, assuming a 23% annual growth in core revenue. While Swiggy’s contribution margin aligns with Zomato’s, its lower adjusted EBITDA margin—due to a smaller gross order value—limits its ability to cover central expenses. The brokerage suggests that increasing transacting users by 30% could help Swiggy move closer to profitability.
Several other brokerages also assigned a “subscribe” rating to the issue.
Brokerages offered mixed ratings on Swiggy’s IPO. Motilal Oswal Financial Services issued a “Subscribe for long-term” rating, citing Swiggy’s innovation-driven growth potential but noting its current losses, making it a suitable choice mainly for high-risk investors; they valued it at 7.8 times FY24 Mcap to sales, reasonable compared to Zomato.
KR Choksey Finserv recommended a “Subscribe” rating, seeing value in Swiggy’s dark store expansion and strong user retention. Similarly, SBI Securities supported a “Subscribe for long-term,” finding the pricing fair relative to competitors. However, Arihant Capital Market advised “Subscribe with caution,” pointing to Swiggy’s net loss and negative PE ratio, suggesting it is mainly for aggressive investors due to its profitability challenges.
About the Codcygmpany
Founded in 2014, Swiggy has become a leading platform, offering users a seamless experience through a single app to browse, order, and pay for food delivery, as well as groceries and household items via its Instamart service. Orders are efficiently fulfilled through a wide network of on-demand delivery partners.
As of June 30, 2024, Swiggy’s Instamart service offered around 19,000 SKUs of grocery and household products. The service managed an extensive network of 557 active dark stores across 32 cities in India. By September 10, 2024, this network expanded to 605 active dark stores, serving 43 cities nationwide.
For the quarter ending June 30, 2024, Swiggy reported a net loss of ₹611.10 crore on a revenue of ₹3,310.11 crore. For the fiscal year ending March 31, 2024, the company posted a net loss of ₹2,350.24 crore, with total revenue amounting to ₹11,634.35 crore. Swiggy’s total market capitalization was estimated at approximately ₹87,300 crore.
Disclaimer: The views and recommendations expressed above are those of individual analysts or brokerage firms, and do not reflect the opinion of InnovativeZone Magazine India. We advise investors to consult with certified experts before making any investment decisions.
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