Swiggy, one of India’s largest food delivery platforms, is gearing up for its much-anticipated initial public offering (IPO).
Swiggy, one of India’s largest food delivery platforms, is gearing up for its much-anticipated initial public offering (IPO). With the growing popularity of food delivery services, the IPO has garnered significant attention from investors. In this article, we’ll break down everything you need to know about the Swiggy IPO, including important dates, pricing details, the latest Grey Market Premium (GMP), and views from analysts on its prospects.
Overview of Swiggy IPO
Swiggy, founded in 2014, has become a household name in India’s rapidly expanding food delivery market. Known for its user-friendly app, a wide range of restaurant tie-ups, and timely deliveries, Swiggy has managed to capture a significant portion of the market, competing with other players like Zomato.
The company has expanded beyond food delivery, including services such as Instamart (grocery delivery), Swiggy Genie (local delivery), and Swiggy One (subscription-based loyalty program). As of 2023, Swiggy is valued at over $10 billion, and the IPO is seen as a crucial step for the company to tap into the public market and raise funds for its growth.
Swiggy IPO: The unlisted shares of Softbank-backed online food delivery giant Swiggy are trading at a premium in the grey market ahead of the launch of its initial public offering (IPO), scheduled to open tomorrow, November 6, 2024. Grey market sources report that Swiggy’s shares were commanding a premium of Rs 20, which translates into a GMP of 5.13 per cent against the upper price band of Rs 390.
With the public offering, the company seeks to raise Rs 11,327.43 crore by offering a fresh issue of 115,358,974 shares and an offer for sale of 175,087,863 shares with a face value of Re 1 apiece.
Swiggy’s IPO will be available at a price band of Rs 371-390 per share, with a lot size of 38 shares. Accordingly, investors can bid for a minimum of 38 shares and in multiples thereof. Retail investors will require Rs 14,820 to apply for one lot of 38 shares. The IPO also includes a reservation for up to 750,000 shares for employees, offered at a Rs 25 discount to the issue price.
The subscription window for Swiggy’s IPO is slated to conclude on Friday, November 8, 2024. Following that, the basis of allotment of Swiggy IPO shares is likely to be finalised on November 11, 2024, with shares likely to be credited to investors’ demat accounts by November 12, 2024.
Shares of Swiggy are expected to make their market debut on the BSE and NSE on November 13, 2024.
JP Morgan India, BofA Securities India, Jefferies India, Kotak Mahindra Capital Company, Citigroup Global Markets India, Avendus Capital, and ICICI Securities are the book-running lead managers for Swiggy’s IPO.
Swiggy intends to utilize the proceeds from the public issue to invest in its subsidiary Scootsy for purposes including repayment of borrowings, expansion of its Dark Store network for Quick Commerce, technology and cloud infrastructure upgrades, brand marketing, and potential acquisitions.
Swiggy IPO review
Brokerages remain optimistic about Swiggy’s public offering and have broadly recommended the investors to subscribe to the issue for the long-term perspective.
Should You Subscribe to the Swiggy IPO?
SBI Securities – Subscribe for long-term
Analysts at SBI Securities have recommended that investors subscribe to the issue for a long-term investment perspective, citing fair valuations. Swiggy, at the upper price band of Rs 390, is valued at a Price/Sales, EV/Sales, and P/BV multiple of 7.8x/7.3x/7.1x, respectively, based on its FY24 financials on post-issue capital. “Compared with Zomato, the issue appears fairly priced on all these parameters,” wrote analysts in a research note.
Arihant Capital – Subscribe for aggressive investors
Brokerage firm Arihant Capital, in a research note, has recommended a ‘Subscribe’ for aggressive investors for Swiggy’s public issue. According to the brokerage, the company’s growth strategy faces notable challenges. While it aims to expand services and partnerships, reducing discounts may impact customer loyalty, and relying heavily on advertising and premium offerings might not be sufficient to drive profitability. Despite efforts to improve operational efficiency, intense competition and current negative financial metrics raise concerns about long-term viability.
“At the upper band of Rs 390, the issue is valued at a negative P/E of (37.40) based on FY24 EPS of INR -10.5. We recommend ‘Subscribe for aggressive investors’ to this issue,” said the brokerage.
The expansion of Dark Stores coupled with the introduction of non-grocery categories aims to boost basket sizes and fulfil increasing consumer demand. Given these strengths and the projected growth of the online food delivery and Quick Commerce markets, analysts believe Swiggy is poised for sustained growth. “At the upper price band, the company is valued at 8x Price to Sales, offering a 76 per cent discount to its competition. Hence, we assign a ‘Subscribe’ rating,” wrote the analysts in a research report.
Bajaj Broking – Subscribe for long-term
Analysts at Bajaj Broking have recommended that investors subscribe to the IPO with a long-term perspective. Over the past three fiscal years, the company has consistently reported losses on a consolidated basis, highlighted the analysts in a research note, adding, “For the last three fiscals, the company has reported an average EPS of Rs (14.90) and an average RoNW of – (35.39) per cent. The issue is priced at a P/BV of 11.60 based on its NAV of Rs 33.61 as of June 30, 2024, and a P/BV of 7.31 based on its post-IPO NAV of Rs 53.36 per share (at the upper cap).”
“If we attribute annualised FY25 earnings to post-IPO fully diluted equity base, then the asking price is at a negative P/E, and based on FY24 earnings it is also at a negative P/E, as the company has posted losses for the reported periods. On other parameters, the issue appears aggressively priced,” said the analysts.
Deven Choksey Research – Subscribe
Analysts at Deven Choksey Research remain bullish on Swiggy and have assigned a ‘Subscribe’ rating to the public issue. According to them, Swiggy’s strategic focus on hyperlocal commerce positions it as a key player in the sector, driven by an innovation-led culture. With a consistent rise in Average Order Value (AOV) and a growing network of Dark Stores, from 301 in FY22 to 523 in FY24, the company is well-equipped to enhance user engagement and operational efficiency. As of June 30, 2024, Swiggy reached 112.73 million users, demonstrating robust growth supported by a unified app experience that simplifies diverse service offerings.
Analyst Views on Swiggy IPO
Analysts have mixed views about Swiggy’s IPO, but most agree that the long-term potential for growth in the food delivery and quick-commerce space makes Swiggy an attractive investment. Here’s a summary of the key perspectives:
Positive Sentiment:
- Strong Market Position: Swiggy’s dominant position in India’s food delivery market, backed by its large user base, diverse offerings, and vast logistics network, makes it a compelling investment for those looking to capitalize on India’s growing e-commerce and food delivery market.
- Expansion into New Verticals: Analysts are particularly bullish on Swiggy’s potential in quick-commerce (grocery and essentials delivery) and its plans to scale up its Instamart business, which could become a key driver of growth in the coming years.
- Revenue Potential: With the trend toward online food delivery and grocery shopping continuing to rise, analysts see strong revenue growth for Swiggy over the next few years, which could translate into attractive returns for IPO investors.
Concerns:
- Profitability Challenges: Despite its strong market share, Swiggy has faced difficulties in achieving consistent profitability. The high cost of customer acquisition, delivery logistics, and technology investments continues to weigh on its margins.
- Intense Competition: Swiggy competes with Zomato, which is also planning its own expansion into quick-commerce and other services. The competition in the food delivery and hyperlocal services space remains fierce, and analysts caution that this could affect Swiggy’s margins in the short term.
- Regulatory Risks: Being part of the larger gig economy, Swiggy could face regulatory hurdles concerning worker rights, taxation, and competition laws, which could impact its business model.
Target Price and Recommendations:
Some analysts have a Buy rating on the Swiggy IPO, citing the company’s strong long-term growth prospects in the food delivery and quick-commerce sectors. However, others suggest exercising caution due to the company’s current lack of profitability and high competition. As with any IPO, experts advise investors to consider their risk tolerance and long-term investment horizon before making a decision.
Conclusion: Should You Invest in Swiggy IPO?
The Swiggy IPO is one of the most anticipated listings in India, with the potential to disrupt the food delivery, e-commerce, and quick-commerce markets. While the company’s strong market position and expansion into new verticals like grocery delivery make it a promising growth story, concerns over profitability, competition, and the overall volatility of tech and gig economy stocks should be considered by potential investors.
For long-term investors, Swiggy’s strong brand, large user base, and diversified service offerings might provide solid returns. However, for those looking for short-term gains, it is essential to assess the GMP, market conditions, and analyst recommendations carefully before making a decision.
As with any IPO, conducting thorough research and seeking professional financial advice is always advisable to ensure you’re making an informed investment choice.
Pingback: Sharda Sinha Health Update: फोक सिंगर की हालत में सुधार की उम्मीद ? - Troll Daily
Pingback: North Korea's Missile Launches Amid US Election Tensions