Swiggy IPO Oversubscribed, Likely to Deliver in the Long Term Swiggy launched its initial public offering (IPO) on November 6, 2024, with an opening price of INR 371-390 per share.
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Foodtech major Swiggy's Rs 3,000-crore IPO has been subscribed 3.59 times so far on its last day of the bidding process with Qualified Institutional Buyers leading with a 6.02 times subscription, according to data available on the National Stock Exchange (NSE). The portion for retail investors has been subscribed 1.12 times while the non-institutional investors (NII) quota recorded a 41 per cent subscription. Significantly, the employee portion of the offer has been subscribed 1.51 times according to the NSE.
Swiggy launched its initial public offering (IPO) on November 6, 2024, with an opening price of INR 371-390 per share. The issue consists of a mix of fresh issue worth INR 4,499 crore and an Offer for Sale part of INR 17.5 crore, bringing the issue size close to INR 11,327 crore. The company also announced an INR 24 discount per share to its employees participating in the IPO.
According to analysts at Bajaj Broking, Swiggy faces challenges across various fronts such as intense competition from Zomato, Zepto, and new market entrants, heavy reliance on revenue from the top 50 Indian cities, and potential challenges with changing food delivery regulations.
However, Bajaj Broking said that they recommend subscribing to the IPO with a
long-term perspective, mainly because of its market performance as a "pioneering hyperlocal commerce platform and an established presence in the hyperlocal commerce sector, making it synonymous with the categories it serves," as noted in a recent RedSeer Report.
Swiggy's IPO comes as the company aims to consolidate its growth and address its financial performance challenges. While Swiggy has shown strong revenue growth, rising by 34 per cent year-over-year to reach INR 11,634 crore in FY24, it is still operating at a loss. In FY24, Swiggy's net loss narrowed to INR 2,350 crore from INR 4,179 crore in FY23, reflecting efforts to improve cost efficiency and move closer to profitability.
The IPO had its anchor book launch on November 5 and attracted significant interest from institutional investors, amassing INR 5,085 crore.
According to Motilal Oswal, Swiggy operates in an oligopoly market that is at a nascent stage, thus providing enough opportunities for players to create their niche.
"Swiggy's innovation DNA is key to success and it could again be at the forefront through its new 10-minute food delivery offering. However, given that the company is still loss-making at an aggregate level, and overall profitability may be some time away, we recommend only High-Risk investors to 'Subscribe for the long term'. At the upper price band of INR 390, the issue is priced at 7.8x FY24 Market Cap to Sales and looks reasonably priced compared to Zomato which is trading at 17.5x."
