The initial public offering (IPO) of Swiggy Limited received a muted response from investors as the issue was subscribed only 15 percent so far on day two of the bidding process. On day one, the issue was subscribed 12 percent.
At 10:44 am, the issue attracted bids for 2,40,61,258 shares, or 15 percent against the issue size of 16,01,09,703 shares. The retail portion of the issue was subscribed at 68 percent, and the non-institutional investor category’s subscription rate stood at 9 percent. The qualified institutional buyers (QIBs) were yet to subscribe.
Meanwhile, the grey market premium (GMP) for Swiggy has declined to INR 9-10, representing a 2 percent premium in the unlisted market. On the first day of bidding, the GMP was at INR 12, indicating a 3 percent premium over the issue price.
Swiggy brought the IPO at a lower valuation of USD 11.3 billion against its earlier target of around USD 15 billion. The company plans to raise around INR 11,300 crore through the issue. The issue comprises a fresh equity sale of INR 4,499 crore with an offer for sale (OFS) for 17,50,87,963 equity shares.
Swiggy IPO price band
The company has fixed the price band at INR 371-390 per share, where investors can bid for 38 shares in one lot and in multiples thereafter.
Swiggy IPO GMP
In the unlisted market, the company’s shares are trading at a GMP of INR 9-10, indicating a premium of 2 percent to the issue price.
Swiggy IPO review
Analysts were mixed on the IPO given the company’s current financial status, competitive pressures and valuations. However, investors can subscribe to the issue based on the long-term potential given the scope for growth in the food delivery space.
“At the upper price band of INR 390, Swiggy is available at Mcap/sales of 7.8x (on FY24 financials), which appears to be fairly priced. We assign a “Subscribe” rating for the issue on a long-term investment basis, considering its strong brand recall, diversified offerings, integrated app, rapid scaling, consistent innovation, expansion of dark stores, and promising industry outlook,” said Geojit.
SBI Securities, said, “Swiggy, at an upper price band of Rs 390, is valued at Price/Sales, EV/Sales and P/BV multiple of 7.8x/7.3x/7.1x, respectively, of its FY24 financials on post issue capital. While comparing with Zomato, the issue appears to be fairly priced on all these parameters. We recommend investors to subscribe to the issue for a long-term investment perspective.”
Motilal Oswal, said, “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 long term’. At the upper price band of Rs 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.”
The food delivery company proposes to use the IPO proceeds for investment in its material subsidiary Scootsy, investment in technology and cloud infrastructure and also for brand marketing and business promotion. This will be done over a four to five-year period.
Swiggy competes with Zomato in India’s online restaurant and food delivery sector, and both have made major bets on a boom in “quick-commerce,” where groceries and other products are delivered in 10 minutes.
The company has incurred net losses in each year since incorporation and has negative cash flows from operations.
For the financial year ended March 2024, the loss stood at INR 2,350 crore versus INR 4,179 crore in FY23 and INR 3,628 crore in FY22. Revenue from operations in the said period, however, doubled to INR 11,247 crore in FY24 from INR 5,704 crore in FY22.
Kotak Mahindra Capital, Citigroup Global Markets, Jefferies India and Avendus Capital are the book-running lead managers, while the registrar to the issue is Link Intime India.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
