Brokerage firm JM Financial has initiated coverage on foodtech major Swiggy, giving it a ‘buy’ recommendation and setting a price target of INR 470, representing a potential 20% upside from its IPO’s upper price band of INR 390.
On November 13, Swiggy made its stock market debut at an 8% premium, listing at INR 420 on the NSE and INR 412 on the BSE. Shares later surged 14% to INR 445.20.
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India’s online food delivery market to grow at CAGR of ~20% – JM Financial
“India’s online food delivery market is likely to grow at a healthy CAGR of ~20% in the foreseeable future, and the odds of disruption by new competition appear miniscule today,” JM Financial stated, according to INC42.
However, the brokerage firm highlighted Swiggy’s duopoly structure in food delivery, ensuring steady growth and profits. Additionally, it noted immense growth potential in Instamart, Swiggy’s quick commerce platform.
“We estimate Instamart was only behind Blinkit as of FY24, with a market share of ~28%… Even assuming QC channel penetration reaches only 1.5-2% over the next 5 years, the market can expand at >50% CAGR,” JM Financial added.
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Swiggy pilots services marketplace ‘Yello’
Notably, Swiggy’s expansion plans include piloting a services marketplace called ‘Yello’ and launching Rare Life, a concierge service for high-net-worth individuals.
Meanwhile, the company’s IPO was oversubscribed 3.59 times, receiving bids for 57.53 crore shares. Qualified institutional buyers’ portion attracted 6.02 times subscription, while retail individual investors subscribed 114% and non-institutional investors 41%.
Moving forward, the company’s early backers Accel India and Elevation Capital are set to pocket over 34 times returns by partially exiting their stakes.
