Swiggy, the food delivery giant, had its initial public offering (IPO) oversubscribed by 3.59 times, despite a slow start in the first two days.
Swiggy raises INR 5,085 cr from institutional investors
According to The Hindu Business Line, the company raised INR 5,085 crore from institutional investors like Fidelity and Blackrock, along with significant contributions from domestic investors.
Continue Exploring: Day 2: Swiggy’s IPO continues to receive lukewarm response with only 35% subscription
Notably, the qualified institutional buyers’ (QIBs) portion was booked 6.02 times, the highest among all. The non-institutional investors’ (NII) portion was booked 41%, and the retail investors’ portion was subscribed 1.14 times. The employees’ portion was subscribed 1.65 times.
Meanwhile, Swiggy’s INR 11,300-crore IPO includes a fresh capital raise of INR 4,499 crore and an offer for sale of 17.51 shares worth INR 6,828 crore. The IPO price band is INR 371-390 per share. At the top price, Swiggy’s valuation is about INR 95,000 crore. In comparison, rival Zomato, which went public in July 2021, has a market valuation of INR 2.25 lakh crore.
“Swiggy’s growth relies heavily on its ability to expand offerings while retaining and attracting users in a cost-effective way. However, the company faces intense competition from Zomato, which enjoys a broad customer base and strong brand loyalty, particularly in the food delivery sector. This competitive landscape puts pressure on Swiggy’s market share, challenging its ability to maintain and grow its customer base. If Swiggy is unable to retain existing customers or attract new users affordably, it risks negative impacts on its business performance, financial stability, and operational results. Effectively managing these challenges is critical for Swiggy’s sustained growth in the highly competitive food delivery industry,” stated Samco Securities.
IPO has a negative P/E ratio and aggressively priced – Bajaj Broking
Furthermore, Bajaj Broking Research released a statement regarding Swiggy’s going public, saying, “The company is an emerging e-commerce and food delivery technology service provider. It has shown steady growth in revenue over the reported periods but has consistently reported losses. Based on its financial performance, the IPO has a negative P/E ratio and is considered aggressively priced according to other metrics. The management is confident in turning operations profitable within the next few years by implementing their strategy and utilising the IPO funds to scale up their offerings. Well-informed investors with cash surplus and a higher risk tolerance may consider investing moderate funds for the long term.”
Continue Exploring: CCI finds Swiggy, Zomato guilty of breaching competition laws
Additionally, the grey market premium (GMP) for Swiggy’s IPO suggests a modest listing gain, with shares trading at a premium of INR 1-2, according to IPO Watch and Investor Gain, which monitor grey market activities.
While Zomato leads with 58%, Swiggy holds a 34% market share in food delivery. In quick commerce, Swiggy’s Instamart has a 20-25% share, and Zomato’s Blinkit has around a 40-45% share, according to brokerage estimates.
Focusing heavily on its quick commerce segment, Swiggy is planning to invest nearly INR 1,179 crore in Instamart. This includes INR 755.4 crore for expanding its dark store network and INR 423.3 crore for lease and licence payments. By the end of June, Instamart had 557 dark stores, and this new investment will increase the number to 741.
