The initial public offering (IPO) of Swiggy saw a muted response from the investors during the second day of the bidding process. The issue, which kicked-off for bidding on Wednesday, November 06, was initially off to a muted start and was booked 12 per cent on day one.
Bengaluru-based Swiggy is selling its shares in the price band of Rs 371-390 apiece. Investors can apply for a minimum of 38 shares and its multiples thereafter. It is looking to raise Rs 11,327.43 crore via IPO, which includes a fresh share sale of 4,499 crore and offer-for-sale (OFS) of up to Rs 17,50,87,863 equity shares.
According to the data from BSE, the investors made bids for 3,97,66,848 equity shares, or 25 per cent, compared to the 16,01,09,703 equity shares offered for the subscription by 1.20 pm on Thursday, November 07. The three-day bidding for the issue will conclude on Friday, November 08.
The allocation for retail investors was subscribed 76 per cent, while the portion reserved for non-institutional investors (NIIs) saw a subscription of 10 per cent. The allocation for employees was booked 1.03 times. However, the quota set aside for qualified institutional bidders (QIBs) quota saw bids 15 per cent for their allocations as of the same time.
Founded in 2014, Swiggy provides its users with an easy-to-use platform that they can access via a single app to search, select, order, and pay for food (food delivery), grocery and household goods (Instamart) and have orders delivered to their homes via an on-demand delivery partner network.
The grey market premium (GMP) for Swiggy has been falling consistently amid the volatile market sentiments. Last heard, the company was commanding a premium of Rs 5-6 in the unofficial market, suggesting a listing pop of barely above one per cent for the investors. The GMP stood at Rs 22 before the bidding kicked off.
Brokerages mostly have a positive view on the issue and suggest subscribing for a long-term citing its leadership in the market, strong entry barriers, solid brand recall, consistent revenue growth. However, negative cash flows, loss making nature of the business and depleting share in quick commerce are the key concerns for the company.
On the profitability side, Swiggy has witnessed setbacks and has recorded negative cash flow from operations since inception. Going ahead, Swiggy's strategy to expand Dark Stores and introduce non grocery categories is intended to enhance basket sizes and drive profitability, said Geojit Financial Services.
"At the upper price band of Rs 390, Swiggy is available at mcap/sales of 7.8 times, which appears to be fairly priced. We assign a 'subscribe' rating for the issue on a long-term investment basis, considering its strong brand recall, diversified offerings, integrated app, rapid scaling, consistent innovation, expansion of dark stores, and promising industry outlook," it said.
For the quarter ended on June 30, 2024, Swiggy reported a net loss of Rs 611.101 crore, with a revenue of Rs 3,310.11 crore. The company clocked in a net loss of Rs 2,350.24 crore with a revenue of Rs 11,634.35 crore for the financial year ended on March 31, 2024. Swiggy's total market capitalization shall be around Rs 87,300 crore.
Swiggy has reserved 7,50,000 equity shares worth Rs 29.25 crore for the eligible employees of the company, who will get a discount of Rs 25 per share. 75 per cent of the net for the net offer has been reserved for qualified institutional bidders (QIBs), while non-institutional investors (NIIs) and retail investors will have 15 per cent and 10 per cent of the net offer, respectively.
The IPO of Swiggy is priced at EV/sales of 7.8 times on FY24 revenue. Over FY22-24, the company’s revenue has grown at CAGR of 40.4 per cent. The fresh proceeds would be majorly utilized for expanding dark stores network for quick commerce growth and marketing and promotional spends, said Indsec Research.
"Management has also stated that the business would continue to burn cash to achieve its objective of attaining large scale coupled with increasing competitive intensity in Quick commerce. We thereby assign 'subscribe for long term' rating to the IPO," it said.
Kotak Mahindra Capital, Citigroup Global India, Jefferies India, Avendus Capital, JP Morgan India, BofA Securities India and ICICI Securities are the book running lead managers of the Swiggy IPO, while Link Intime India is the registrar for the issue. Shares of Swiggy shall be listed on both BSE and NSE on November 13.