Food delivery giant Swiggy’s initial public offering (IPO), open for subscription from November 6 to 8, will be priced between ₹371 and ₹390.
After a correction in the stock market, the company has lowered its estimated IPO valuation to $11.3 billion, down 25 percent from its previous estimate of $15 billion.
Proceeds will support Swiggy’s strategic initiatives including dark store expansion, Instamart’s high-speed commerce operations, technology infrastructure upgrades and brand promotion efforts.
In addition, debt repayment and acquisitions are on the agenda, with funds allocated as follows: 26 percent for dark store expansion, 24.8 percent for brand promotion, 15.6 percent for technology and cloud infrastructure, and 29.7 percent for inorganic growth and operating costs.
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Analysts believe that an IPO of Swiggy could pique investor interest for some profit opportunity from the listing.
While Swiggy has huge growth potential as it heads towards its IPO, the company faces the challenge of competing with Zomato’s established market leadership.
“Swiggy needs to strategically utilize the proceeds from its IPO to narrow the market share gap with Zomato. Expanding its services to new segments and cities will be crucial. Swiggy also needs to accelerate Instamart to compete more strongly with Blinkit in the fast commerce space. This can be done by expanding the network of dark stores, optimizing logistics for faster delivery, increasing product range and increasing customer engagement through strategic partnerships and technology integration,” said a report by Kotak Securities.
The report notes that Swiggy has made significant progress in reducing its losses, demonstrating its commitment to improving financial health and driving towards profitability.
“The company’s innovative use of technology, such as AI and data analytics, enhances customer experience and optimizes delivery operations, thereby maintaining its competitive advantage over competitors like Zomato. For long-term investors, Swiggy offers an attractive, high-risk, high-reward bet on the future of food technology in India,” the report said.
Swiggy’s rival Zomato is currently trading at a price-to-earnings ratio of 297x, while the former’s ratio stands at -35.23x. However, Swiggy’s price range is positioned higher than Zomato’s current trading price of ₹247 at the end of the session on October 30.
Swiggy’s pre-IPO earnings per share (EPS) is calculated based on the pre-issue shareholding, as stated in the Red Herring Prospectus (RHP), and the most recent earnings for the financial year ending March 31, 2024.
Swiggy shares are currently trading at a GMP of ₹22-25, indicating a price upside of around 6.41 per cent, according to Investorgain data. This is a significant decline from the previously forecast GMP of ₹130 on October 29 on IPO Watch, reflecting muted sentiment in the gray market. However, GMP remains a speculative indicator and does not always correspond to the actual listing price.
On the financial front, Swiggy narrowed its FY24 losses to ₹2,350.2 crore from ₹4,179.3 crore last year, while revenue from operations grew a robust 36 per cent to ₹11,247.4 crore from ₹8,264.6 crore. In the first quarter of FY25, the company reported a loss of ₹611 crore, which was slightly higher than ₹564 crore in the same period last year. However, quarterly revenue rose 35 per cent to ₹3,222.2 crore.
According to reports, the IPO is off to a strong start, with the anchor book attracting significant interest from both global and domestic investors.
The $600 million anchor book was oversubscribed 25 times, attracting bids of $15 billion. Key investors vying for a share of the IPO include global investment firms Fidelity, Capital Group and Norges Bank Investment Management.
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Also read: Swiggy likely to price $1.35 billion IPO at ₹371-390 per share, say sources