Swiggy shares list at ₹420 on NSE, opening 7.7% above IPO price in a highly anticipated debut

Swiggy IPO listing: Swiggy shares made a decent debut on the bourses on Wednesday, November 13 as they listed at ₹420 on NSE, a premium of 7.7 percent over the issue price of ₹390. Meanwhile, on BSE, it listed at ₹412, up 5.64 percent from IPO price.

Swiggy's initial public offering (IPO), valued at ₹11,327.43 crore, was open for subscription from November 6 to November 8. The food platform to quick-commerce company's shares were priced in the range of ₹371-390 per share for the issue.

Following the three days of bidding, Swiggy IPO closed with robust demand, garnering 3.59 times bids. The IPO received bids for 57.53 crore shares against 16 crore shares on offer. The retail investor segment was booked 1.14 times, while the non-institutional investors (NII) category wasn't fully subscribed and was bid 0.41 times. The qualified institutional buyers (QIB) portion was subscribed the most at 6.02 times. Finally, the employee quota was booked 1.65 times.

About the IPO

Swiggy IPO was a combination of fresh issue of 11.54 crore shares aggregating to ₹4,499.00 crore and offer for sale of 17.51 crore shares aggregating to ₹6,828.43 crore. Post the issue, promoter shareholding in the company will be reduced to 52.97 percent from 63.56 percent before the IPO. The company raised ₹5,085 crore from anchor investors on November 5, 2024. Retail investors could apply with a minimum lot size of 38 shares, requiring a minimum investment of ₹14,820.

The company plans to allocate the Net Proceeds for several strategic objectives. These include investing in its material subsidiary, Scootsy, to repay or partially pre-pay certain borrowings. Additionally, funds will support Scootsy's expansion of its Quick Commerce segment by establishing Dark Stores and covering related lease or license costs. Investments will also go toward enhancing technology and cloud infrastructure. To boost its platform's presence, the company intends to allocate funds for brand marketing and promotional activities across various segments. Finally, a portion of the proceeds will be earmarked for potential acquisitions to drive inorganic growth, as well as general corporate purposes.

Swiggy has allocated 7,50,000 equity shares valued at ₹29.25 crore for its eligible employees, offering them a ₹25 per share discount. Of the net offer, 75 percent is reserved for qualified institutional bidders (QIBs). Non-institutional investors (NIIs) and retail investors will have allocations of 15 percent and 10 percent of the net offer, respectively.

Kotak Mahindra Capital Company Limited, Citigroup Global Markets India Private Limited, Jefferies India Private Limited, Avendus Capital Pvt Ltd, J.P. Morgan India Private Limited, Bofa Securities India Limited and ICICI Securities Limited were the book running lead managers of the Swiggy IPO, while Link Intime India Private Ltd was the registrar for the issue.

Brokerage Views

Ahead of its highly anticipated market debut following an over threefold subscription, Swiggy has drawn attention from brokerages, with Macquarie giving it an 'underperform' rating and setting a target price of ₹325, indicating a potential 17 percent downside from the its IPO price. The foreign brokerage acknowledged Swiggy's significant growth potential but noted that its path to profitability could be uneven.

As India’s second-largest app in Food Delivery, Quick Commerce, and Out-of-Home services, Swiggy has the potential to close in on market leader Zomato. However, Macquarie pointed out that Quick Commerce poses greater challenges, with no clear route to sustainable profitability.

Macquarie projects EBIT breakeven by FY28, contingent on a 23 percent annual growth in core revenue. While Swiggy's contribution margin is similar to Zomato's, its adjusted EBITDA margin is lower due to a smaller gross order value, limiting its capacity to absorb central expenses. The brokerage suggests that boosting transacting users by 30 percent could help bridge this profitability gap.

Multiple other brokerages also had a 'subscribe' rating for the issue.

Brokerages provided mixed ratings for Swiggy's IPO. Motilal Oswal Financial Services rated it "Subscribe for long-term," noting its innovation-driven growth potential but highlighting current losses, recommending it mainly for high-risk investors at 7.8 times FY24 Mcap to sales, reasonable compared to Zomato. KR Choksey Finserv saw potential in Swiggy’s dark store expansion and user retention, assigning a "Subscribe" rating due to its attractive valuation. SBI Securities also supported a "Subscribe for long-term," citing fair pricing relative to competitors. However, Arihant Capital Market suggested "Subscribe with caution," emphasizing concerns over Swiggy’s net loss and negative PE ratio, recommending it only for aggressive investors given current profitability challenges.

About the Company

Established in 2014, Swiggy offers users a seamless platform accessible through a single app, enabling them to browse, choose, order, and pay for food delivery as well as grocery and household items through its Instamart service. Orders are fulfilled through an extensive on-demand delivery partner network, ensuring efficient home delivery.

By June 30, 2024, Swiggy offered around 19,000 SKUs of grocery and household items. Its Instamart service managed an extensive network of 557 active dark stores spanning 32 Indian cities. By September 10, 2024, this network had expanded to 605 active dark stores across 43 cities in India.

For the quarter ending June 30, 2024, Swiggy reported a net loss of ₹611.101 crore on a revenue of ₹3,310.11 crore. For the fiscal year ending March 31, 2024, the company recorded a net loss of ₹2,350.24 crore, with total revenue reaching ₹11,634.35 crore. Swiggy's total market capitalization was estimated at approximately ₹87,300 crore.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.