Swiggy IPO Day 1: Check subscription details, GMP, and should you subscribe?

Swiggy IPO: Bengaluru-based Swiggy opened for public subscription within a price band of Rs 371 to Rs 390 and people will be able to place their bids till November 8.

In Short

• Swiggy IPO opens with modest response on day 1
• Latest GMP indicates weak demand with listing gain potential
• Shares priced between Rs 371-390 for public subscription

The initial public offering (IPO) of Swiggy opened for subscription today and has garnered 8% subscription by 1 pm. The food delivery and quick-commerce company has received bids for 1.24 crore shares out of the 16 crore shares available, according to data on the NSE.

The retail individual investors’ category is leading with a 37% subscription, while the non-institutional investors’ segment has seen 3% subscription. Qualified institutional investors have not yet participated.

Swiggy shares are set to be listed on the exchanges next week, on November 13, Wednesday, and the share allotment will take place on Monday, November 11.

Ahead of the IPO, Swiggy raised Rs 5,085 crore from anchor investors, including New World Fund Inc, Government Pension Fund Global, Nomura Funds Ireland Public Limited Company, Fidelity Funds, BlackRock, Allianz Global Investors Fund, and Schroder International.

A total of 13.04 crore shares were allocated to 151 funds at Rs 390 per share, amounting to Rs 5,085 crore. Of these, 5.3 crore shares were allotted to 19 domestic mutual funds, spread across 69 investment schemes.

In addition, shares were allotted to ICICI Prudential Mutual Fund, SBI Mutual Fund, HDFC Life Insurance Company Ltd, SBI Life Insurance Co. Ltd, and ICICI Prudential Life Insurance Company Ltd during the anchor round.

LATEST SWIGGY IPO GMP

Swiggy IPO GMP is hinting at a weak demand for shares in the grey market. According to Investorgain and IPO Watch, tracking the grey market premium, the shares of Swiggy are commanding a GMP in the price range of Rs 12-20 in the unofficial market, indicating a listing gain of around 3-5%.

However, it is important to note that GMP is not always an accurate indicator for bidding and investors should examine various aspects such as financials, market share and growth potential before taking a final call.

SWIGGY IPO KEY DETAILS

Bengaluru-based Swiggy opened for public subscription within a price band of Rs 371 to Rs 390 and people will be able to place their bids till November 8.

The food delivery major is aiming to raise Rs 11,327 crore through the Initial Public Offering (IPO), comprising a fresh issue of shares worth Rs 4,499 crore and an Offer for Sale (OFS) component amounting to Rs 6,828 crore.

At the upper end of the price band, Swiggy's valuation is estimated at around Rs 95,000 crore. Its key competitor, Zomato, which went public in July 2021, commands a market valuation of Rs 2.13 lakh crore.

According to the prospectus, the company intends to allocate the proceeds from the fresh issue towards investment in technology and cloud infrastructure, brand marketing, business promotion, debt repayment, and funding for inorganic growth and general corporate purposes.

Founded in 2014, Swiggy reported a narrowed loss of Rs 611 crore for the quarter ended June 2024, compared to a loss of Rs 564 crore in the same period the previous year.

BROKERAGE VIEWS

Brokerages are divided in their outlook on Swiggy’s IPO, with some optimistic about its long-term growth prospects in the quick commerce market, while others highlight challenges around profitability and competition.

Master Capital Service Ltd: The growing number of digitally-savvy Indian consumers, with a base of 670-680 million smartphone users expected to reach 950-990 million by 2028, has driven demand for convenience and digital services.

Swiggy, a leader in hyperlocal commerce, has 112.73 million users as of June 30, 2024, and is well-positioned to benefit from India's increasing purchasing power and digitisation. The company’s unified app, large user base, and on-demand delivery network create opportunities for restaurant, merchant, and brand partners. For long-term investors, this IPO presents a strong opportunity.

Sujit Modi, CIO, Share.Market: Swiggy’s IPO marks a new phase in the competition with Zomato, expanding into the public investment space. The company faces challenges, including stiff competition from Zomato's Blinkit and new entrants like Flipkart Minutes. Success will depend on scaling Instamart, managing costs, and innovating service speed and reliability.

While Swiggy's revenue stood at Rs 11,247 crore in FY24, it posted a net loss of Rs 2,350 crore, highlighting the need for profitability improvements. Regulatory challenges and competition from new players like JioMart could further affect scalability. Nevertheless, the IPO offers investors an opportunity to participate in India's evolving food delivery and quick commerce market.

Choice Broking: At the higher price band, Swiggy’s EV/Sales multiple of 7.3x is lower than its listed peer Zomato. Despite robust growth, Swiggy's operations remain loss-making at the EBIT level. With the company aiming for profitability in the future, we remain cautiously optimistic.

Given the growth potential in quick-commerce and the supply chain distribution market, and the duopoly structure, we assign a "Subscribe for Long Term" rating to the issue.

Anand Rathi: Swiggy is well-positioned to capitalize on the vast opportunities in quick commerce. As the company scales its revenue and gradually improves its bottom line, the issue appears fairly priced. We recommend a "Subscribe for Long Term" rating for this IPO.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)