Swiggy IPO: Food delivery and quick commerce platform Swiggy’s IPO worth Rs 11,324 crore opens today. It consists of Rs 4,500 crore fresh issue and remaining as an offer for sale. Without a specific promoter, various institutional investors including Accel India, Apoletto Asia, Alpha Wave Ventures, DST Euro Asia, and Norwest Venture Partners are selling portions of their holdings. The fresh issue funds will support debt repayment, dark store expansion, technological improvements, marketing, and acquisition strategies.
Swiggy IPO: Price brand, GMP
Investors can participate in the IPO until November 8. The company has established a price range of Rs 371-390 per share, with a minimum lot size of 38 shares and additional investments in multiples thereof.
The company’s shares currently show a Grey Market Premium (GMP) of Rs 12 in unofficial trading, suggesting a modest 3% premium above the issue price.
The Swiggy IPO implies a market capitalization of Rs 87,299 crore, valuing Swiggy at 7.7 times FY24 annualized revenues, compared to Zomato’s 17 times multiple.
Swiggy IPO: Should you subscribe?
While Zomato achieved profitability in FY24 after three years of listing, Swiggy remains unprofitable and faces competition in quick commerce, according to an ET analysis. Despite these challenges, India’s quick commerce potential makes this IPO attractive for long-term investors, though business execution risks persist, the analysis says.
Market analysts have diverse opinions regarding the Swiggy IPO, considering the company’s present financial condition, market competition, and valuation metrics. However, the food delivery sector’s growth potential makes it a considerable option for long-term investors.
“As of the fiscal year 2024, Swiggy continues to operate at a loss, in contrast to its competitor, Zomato, which has recently achieved profitability. We advise investors to Avoid this IPO until the company’s financial performance and growth outlook improve. Waiting until Swiggy demonstrates improved financial results and a clearer path to sustainable growth would be a more prudent investment approach,” said Samco Securities.
“Swiggy, at an upper price band of Rs 390.0, is valued at Price/Sales, EV/Sales and P/BV multiple of 7.8x/7.3x/7.1x respectively of its FY24 financials on post issue capital. While comparing with Zomato, the issue appears to be fairly priced on all these parameters. We recommend investors to subscribe to the issue for a long term investment perspective,” said SBI Securities.
About Swiggy
The Bengaluru company, established in 2014 for food delivery, expanded to quick commerce in 2020. Its unified application offers multiple services: food delivery, Instamart for groceries, Dineout for restaurant bookings, SteppinOut for events, and Genie for pickup services. The platform’s integration enables user convenience and cross-selling opportunities, with over 75% of Instamart users originating from food delivery.
As of June quarter, Swiggy served 15.9 million monthly active users through 557 dark stores and 54 warehouses, utilizing 457,249 delivery partners monthly. The food delivery segment, contributing 50% of gross revenues with 43% market share, is the only profitable division by adjusted Ebitda. Instamart generated 11.6% of gross revenues in the same quarter.
The company’s revenue increased at 40% CAGR over three years to Rs 11,247 crore. Net losses decreased from Rs 3,629 crore in FY22 to Rs 2,350 crore in FY24.
Advertising expenses reduced from 35% to 16.5% of revenues between FY22 and FY24. Instamart expanded from two to 43 cities since launch, showing potential to exceed food delivery business. However, employee attrition increased from 37% to 54% between FY22 and FY24.
