1 week ago
Shares of Swiggy Ltd. are set to make their Dalal Street debut on Wednesday, November 13. The company is headed for a muted listing on the bourses, if one goes by the signals from the grey market.
Ahead of its debut, the unlisted shares of the Softbank-backed company are trading with a grey market premium of ₹2.
The grey market is an unofficial ecosystem where shares start trading before the allotment in the IPO and continue till the listing day. Most investors track the GMP to get an idea of the listing price.
The initial public offering (IPO) of Swiggy saw decent interest from investors, with the issue receiving 3.59 times subscription at close. The retail category was booked 1.14 times, qualified institutional buyer at 6.02 times, and the non-institutional investor category at 0.41 times.
Analysts had given a mixed ratings on Swiggy's IPO. While some advised investors to subscribe, citing a fair valuation, others recommended avoiding it due to "reported negative" cash flows, ongoing losses, and challenges in the growth strategy.
Considering the low subscription demand from NII's and retail investors, along with current market sentiment, Prashanth Tapse of Mehta Equities said that there is a high possibility of a flat to negative listing, potentially within a range of (+or-) 5-10% of its issue price.
Tapse believes that the majority of investors, especially NIIs and retail investors, stayed back for several reasons, including the negative cash flow business model, concerns about high competition, and the ongoing negative market sentiment.
While the IPO received a decent subscription, Shivani Nyati of Swastika Investmart said the current grey market premium (GMP) indicates a muted investor response. This subdued sentiment, Nyati said, is likely influenced by the company's continued losses, despite steady revenue growth.
Further, Nyati said the IPO's valuation, while appearing reasonable based on certain metrics, presents a challenge due to its negative earnings.
Additionally, the current volatile market conditions is also expected to further impact the listing performance.
"Investors with a high-risk tolerance and a long-term perspective may consider the IPO, but it's essential to acknowledge the potential risks associated with the company's current financial position and the broader market uncertainties," Nyati said.
The IPO of Swiggy Ltd. was open for subscription between November 6 and November 8.
The ₹11,327 crore IPO included a fresh issue of 11.54 crore shares aggregating to ₹4,499 crore, while existing shareholders offloaded 17.5 crore shares aggregating to Rs 6,828 crore.
The company sold its shares in a fixed price band of ₹371-390 apiece.
Swiggy is expected to have a post-listing market capitalisation of ₹87,299 crore at the upper end of the price band.
The company will use ₹1,343.5 crore out of net fresh issue proceeds for investment in its subsidiary Scootsy, and ₹703 crore for investment in technology and cloud infrastructure. Furthermore, ₹1,115 crore will be spent on brand marketing and business promotion expenses, with the remainder allocated for inorganic growth and general corporate purposes.
Founded in 2014, Swiggy partners more than 200,000 restaurants across India to deliver food in the world’s most populous nation, as per its website. Its rivals include Zomato Ltd., e-commerce giant Amazon.com Inc.’s India unit and conglomerate Tata Group’s BigBasket in the country’s fast-growing quick commerce sector.
Swiggy primarily operates in a B2C marketplace platform where it aggregate restaurant & merchant partners that can list their food & products, while users can discover and purchase such items. The company facilitates the fulfilment of these orders through enabling delivery, reservations, payments, and lead generation for partners.
Swiggy posted a net loss of ₹611.101 crore, and a revenue of ₹3,310.11 crore for the June 2024 quarter. The company reported a net loss of ₹2,350.24 crore and a revenue of ₹11,634.35 crore for the financial year ended on March 31, 2024.
