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Published: November 8, 2024
Updated: November 8, 2024

Swiggy’s IPO Sees Moderate Interest as Subscription Reaches 25% on Day 2

Swiggy, the popular food and grocery delivery platform, is currently in the midst of its highly anticipated initial public offering (IPO). Launched on November 6, 2024, the IPO has seen a slow start, with subscription levels reaching only 25% by the second day of bidding.

IPO Details and Pricing Strategy

The Bengaluru-based company is offering shares in the price range of Rs 371-390, with a minimum application requirement of 38 shares and additional multiples. Swiggy aims to raise Rs 11,327.43 crore through this IPO, comprising a fresh issue of Rs 4,499 crore and an offer-for-sale (OFS) of up to 17.5 million shares. This capital will largely support Swiggy's growth plans, particularly in its quick-commerce segment.

Current Subscription Status Across Investor Categories

As of midday on November 7, Swiggy’s IPO had achieved a 25% subscription level, with bids for 39.8 million shares against the 160 million available for subscription. The retail investor segment saw the highest interest, reaching a 76% subscription rate, while the portion reserved for non-institutional investors (NIIs) reached 10%. Employee allocation was oversubscribed by 1.03 times, while qualified institutional buyers (QIBs) had bid for only 15% of their designated shares.

Grey Market Premium and Market Sentiment

The grey market premium (GMP) for Swiggy shares has dropped considerably, with current premiums ranging from Rs 5-6 per share, down from Rs 22 just before the IPO launch. This suggests a potential listing pop of around 1%, reflecting the cautious investor sentiment amid a volatile market.

Mixed Brokerage Recommendations

Brokerages have expressed a mostly positive long-term outlook on Swiggy, citing the company’s market leadership, brand recognition, and consistent growth. However, some concerns remain regarding Swiggy’s loss-making status, negative cash flow, and decreasing quick-commerce market share. Geojit Financial Services pointed out Swiggy’s fair valuation at a price-to-sales ratio of 7.8 times at the upper band and recommended a “subscribe” rating for long-term investors.

Financial Performance and Growth Strategy

Swiggy reported a net loss of Rs 611.1 crore for the quarter ending June 2024 on revenue of Rs 3,310.1 crore. For the fiscal year ending March 2024, Swiggy’s net loss totaled Rs 2,350.2 crore on a revenue of Rs 11,634.4 crore. To strengthen its position in the competitive quick-commerce market, Swiggy plans to use IPO proceeds for expanding its “dark store” network and enhancing marketing efforts.

Employee Reservation and Key Managers

Swiggy has set aside 750,000 equity shares worth Rs 29.25 crore for employees, who receive a Rs 25 discount per share. Leading managers for the IPO include Kotak Mahindra Capital, Citigroup Global India, Jefferies India, and Avendus Capital, with Swiggy’s shares set to list on both the BSE and NSE on November 13.

Swiggy’s IPO offers a mixed appeal, with high potential for growth but also notable risks. While the IPO has garnered steady interest from retail investors, overall subscription remains modest. Long-term investors with a high-risk appetite may find Swiggy’s IPO a promising addition, especially with its strategic focus on quick-commerce expansion and brand strength.