Swiggy Limited, India’s leading food delivery and quick commerce platform, opened its initial public offer (IPO) for subscription on November 6, 2024. The IPO, open for subscription until November 8, is expected to attract substantial interest from retail and institutional investors eager to participate in Swiggy’s growth story as it aims to raise Rs 11,327.43 crore through a mix of fresh shares and an offer for sale (OFS). The company has set the IPO price band between Rs 371 and Rs 390 per share.

Swiggy raised approximately Rs 5,085 crore through its anchor round, with participation from a diverse group of investors. According to the company’s exchange filing, Swiggy allocated 13.03 crore equity shares at Rs 390 per share to 75 anchor investors. These included top domestic players like ICICI Prudential Mutual Fund, Kotak Mutual Fund, SBI Mutual Fund, Mirae Mutual Fund, and Nippon Mutual Fund, indicating robust local support. Global names such as Capital Group, Fidelity Investments, Blackrock, HSBC, Allianz Global, and Norway’s Government Pension Fund Global also took part.

Approximately 40.65% of the anchor allocation went to 19 domestic mutual funds via 69 different schemes, underscoring strong local demand. High-profile anchor investors from regions including the US, EMEA, and Asia further solidified the public issue’s appeal across global markets.

Subscription Status

By 1 pm on November 6 (day 1), Swiggy’s IPO had achieved 8% subscription on its first bidding day, with bids received for 1.27 crore shares out of the 16 crore shares on offer, according to NSE data. The retail individual investors’ segment led the interest with a 38% subscription, while non-institutional investors subscribed at 3%. Swiggy shares are set to debut on the exchanges next Wednesday, November 13, with share allotments expected on Monday, November 11.

Grey Market Premium (GMP)

Ahead of the subscription opening, Swiggy’s IPO commanded a grey market premium (GMP) of Rs 11, reflecting moderate optimism among informal traders about the stock’s listing day performance. As of midday on the first day of bidding, the IPO was subscribed 0.07 times overall, with retail investors subscribing 0.33 times and non-institutional investors (NII) at 0.03 times.

Swiggy’s Financials

In fiscal year 2024 (FY24), Swiggy posted revenue of Rs 3,222.2 crore, marking a 34.8% year-over-year increase. However, the company recorded a net loss of Rs 611 crore. Analysts have noted that Swiggy’s strategic focus on hyperlocal commerce and its growing network of “Dark Stores” (warehouses that enable rapid local delivery) are potential game-changers for expanding its customer base and enhancing operational efficiency.

As of June 2024, Swiggy had a user base of 11.3 crore, supported by its unified app experience, which allows users to seamlessly navigate food delivery, grocery delivery, and other services. The company’s Dark Store count has increased from 301 in FY22 to 523 in FY24, enabling faster delivery times and supporting higher order volumes. By adding non-grocery categories to its offerings, Swiggy aims to increase basket sizes and retain high-frequency users.

Valuation

Swiggy’s IPO valuation has sparked extensive discussion among market analysts, with the company valued at a Price-to-Sales ratio of 8x at the upper price band, offering a 76% discount compared to competitors like Zomato. Here’s what leading brokerages have to say:

Arihant Capital recommends “Subscribe for aggressive investors,” highlighting the company’s revenue growth and challenges in cutting operational losses. Despite ambitious growth plans, such as expanding partnerships and reducing customer discounts, Swiggy’s path to profitability remains complex due to intense competition in the food delivery market. At the IPO price, Swiggy is valued at a negative Price-to-Earnings (P/E) ratio of -37.40 based on its FY24 earnings per share (EPS) of -Rs 10.5.

Deven Choksey endorses the IPO with a “SUBSCRIBE” rating, citing Swiggy’s strategic positioning in the quick commerce sector. The firm notes Swiggy’s innovation-driven culture, consistently rising average order values (AOV), and its expanding Dark Store network. These factors, coupled with a growing user base and high transaction frequency, position Swiggy as a strong contender for long-term growth.

SBI Securities suggests investors subscribe from a long-term perspective. Comparing Swiggy’s valuation with Zomato’s, SBI Securities finds Swiggy’s pricing reasonable based on multiple valuation metrics, including Price-to-Sales, EV/Sales, and Price-to-Book Value ratios.

Key Details of the Swiggy IPO

For investors looking to participate, here are some essential details:
IPO Price Band: The price range is set at Rs 371 to Rs 390 per share.
IPO Dates: The subscription window is open from November 6 to November 8, 2024.
IPO Lot Size: Investors can bid in lots of 38 shares.
IPO Size: Swiggy aims to raise Rs 11,327.43 crore, including fresh issue proceeds and OFS.
Registrar: Link Intime India Private Limited is the official registrar.
Listing Date: Swiggy shares are expected to be listed on the NSE and BSE on November 13, 2024.
Lead Managers: The IPO is led by Kotak Mahindra Capital, Citigroup Global Markets India, Jefferies India, Avendus Capital, JP Morgan India, BofA Securities, and ICICI Securities.

Swiggy’s focus on hyperlocal commerce and operational efficiency is widely seen as a competitive advantage. By enhancing its offerings through a diversified platform, which includes Dark Stores and non-grocery categories, the company aims to capture a larger share of India’s burgeoning online delivery market. This market is expected to grow steadily as urbanization, internet penetration, and the adoption of digital services increase.

Swiggy’s reliance on digital advertising and premium services to boost revenue may impact customer retention if discounts decrease, especially as competition remains fierce with rivals like Zomato and Dunzo. Yet, Swiggy’s integrated platform and personalized user experience provide it with a solid foundation to retain high-frequency users, a critical metric for success in the quick commerce domain.

Story first published: Wednesday, November 6, 2024, 13:33 [IST]