Swiggy, a leading player in India’s burgeoning food delivery and e-commerce sector, launched its IPO last week and received a decent subscription of just over 3 times. The company’s shares will debut at the bourses today and the GMP indicates a premium of 0.26 percent over the issue price.
Analysts said this subdued sentiment is likely influenced by the company’s continued losses, despite steady revenue growth.
“The IPO’s valuation, while appearing reasonable based on certain metrics, presents a challenge due to negative earnings. Additionally, the current volatile market conditions may further impact the listing performance,” said Shivani Nyati, Head of Wealth at Swastika Investmart.
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.
Post listing, Prashanth Tapse of Mehta Equities said only risky investors should consider the company to “Hold For Long Term despite knowing short term volatility and competitive pressures in the sector.
“For non-allottees, we advise them to wait and watch for the price to settle and revisit the space with better discounted opportunities,” he said.
Nyati also recommends a cautious approach in dealing with Swiggy as investors with a high-risk tolerance and a long-term perspective may consider looking at the company. “It is essential to acknowledge the potential risks associated with the company’s current financial position and the broader market uncertainties,” she adds.
The company has incurred net losses in each year since incorporation and have 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.
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