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Published: November 4, 2024
Updated: November 4, 2024

Swiggy IPO: Key Details, Grey Market Trends, and What Investors Need to Know

Swiggy is set to launch its highly anticipated Initial Public Offering (IPO), with the price band for its shares fixed between Rs 371 to Rs 390. The IPO opens for subscription on November 6 and will close on November 8, while the allocation to anchor investors is planned for November 5. This IPO has garnered considerable attention as Swiggy looks to expand its market position in the fast-paced food and grocery delivery industry.

IPO Structure and Financial Overview

Swiggy’s IPO will include a fresh issue amounting to Rs 4,499 crore, along with an Offer for Sale (OFS) of 17,50,87,863 equity shares from its current shareholders. Despite a challenging fiscal period, Swiggy has shown improvement, reducing its net loss to Rs 2,350.24 crore in FY24. However, with negative earnings per share (EPS), the IPO's valuation remains unconventional, as it lacks the typical price-to-earnings (P/E) ratio often used by investors to gauge potential returns.

The company has structured its share allocation with 75% reserved for Qualified Institutional Buyers (QIBs), 15% for Non-Institutional Investors (NIIs), and the remaining 10% set aside for retail investors. Notably, eligible employees will receive a Rs 25 discount per share, adding an incentive for internal stakeholders.

Critical IPO Dates and Allotment Details

Swiggy has outlined key dates for the IPO process:

Subscription Period: November 6 to November 8

Anchor Investor Allocation: November 5

Basis of Allotment: November 11

Refund Initiation: November 12

Shares Credited to Demat Accounts: November 12

Listing Date on BSE and NSE: November 13

Investors must note the IPO’s lot size, which is set at 38 equity shares, with bids required to be placed in multiples of this quantity. This structured allotment aims to ensure a balanced distribution of shares across investor categories.

Company Background and Growth Trajectory

Since its inception in 2014, Swiggy has grown into a prominent player in India’s food delivery sector. Over time, the company has expanded into quick commerce, offering grocery and essential item deliveries through Swiggy Instamart. Other services include Swiggy Genie, an on-demand courier service, and Swiggy Minis, which caters to small and local businesses. This diversified approach has positioned Swiggy as a multifaceted service provider in the e-commerce ecosystem.

Financially, Swiggy reported a revenue increase of 34% from Rs 8,395 crore in FY23 to Rs 11,247 crore in FY24. Despite these gains, operational losses have been a challenge. However, the reduction in losses from Rs 4,179.31 crore to Rs 2,350.24 crore reflects Swiggy's efforts toward operational efficiency and margin improvement, signaling its commitment to a path of sustainable growth.

Swiggy's Valuation and Comparison with Competitors

Swiggy’s closest competitor, Zomato, currently commands a price-to-earnings (P/E) ratio of 634.50. Due to Swiggy’s ongoing losses, the usual valuation metrics, like P/E ratio, don’t apply. However, investor interest remains high, with many hopeful about Swiggy’s long-term growth, especially in the quick commerce space, where demand continues to grow.

Grey Market Premium (GMP) Insights

Swiggy’s shares in the grey market initially had a premium of Rs 130, but recent fluctuations have brought the GMP down to Rs 14. This decline might indicate shifting investor sentiment as they weigh Swiggy's financials against market expectations. Although grey market trends can provide early signals about an IPO's market reception, they are not definitive indicators of long-term performance.

Planned Utilization of IPO Funds

Swiggy has outlined strategic plans for deploying the IPO proceeds across key business areas:

Debt Repayment: Rs 137.41 crore will go toward settling debts linked to its subsidiary, Scootsy.

Expansion of Dark Stores: With Rs 982.40 crore allocated to grow its dark store network, Swiggy aims to enhance its quick commerce services.

Technology and Cloud Infrastructure: Rs 586.20 crore is reserved to boost technology and cloud operations, strengthening the platform's scalability.

Brand Marketing: Swiggy plans to invest Rs 929.50 crore in brand marketing to increase its presence and customer acquisition.

General Corporate Purposes: Remaining funds will be directed toward potential acquisitions and other corporate activities to support overall growth.

Notable Interest from Celebrities and Existing Shareholders

Swiggy’s IPO has drawn interest from high-profile figures in Bollywood and sports, including Amitabh Bachchan and Rahul Dravid, underscoring its widespread appeal. Additionally, early investors like Accel are expected to realize substantial returns, with an estimated 35x gain from their average acquisition price of Rs 11.17 per share.

Evaluating Swiggy’s Long-Term Potential

Swiggy’s upcoming IPO presents a promising yet complex investment opportunity. While its quick commerce segment offers considerable growth potential, Swiggy faces significant competition from established players like Zomato. As the company moves towards reducing operational losses, investors are cautiously optimistic about its path to profitability. Those considering Swiggy’s IPO should weigh both the growth opportunities and the risks, especially in a dynamic and competitive market environment.