Swiggy IPO: Issue sails through on Day 3, QIB portion booked 4x; GMP further falls

The initial public offering (IPO) of Swiggy managed to sail through on the third and final day of the bidding process, thanks to the last day bidding from the institutional investors. The issue was booked 12 per cent on day one, while ended day two with only 28 per cent subscription.

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 39,64,81,170 equity shares, or 2.48 times, compared to the 16,01,09,703 equity shares offered for the subscription by 2.15 pm on Friday, November 08. The three-day bidding for the issue, which began on Wednesday November 06, concludes today.

The allocation for qualified institutional bidders (QIBs) was subscribed 4.07 times, while the portion reserved for the retail investors saw a subscription of 1.02 times. The allocation for employees was booked 1.46 times. However, the quota set aside for non-institutional investors (NIIs) saw bids merely 28 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 only Rs 1 in the unofficial market, suggesting a flat land at Dalal Street. The GMP stood at Rs 10 on the first day of the bidding.

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.

As Swiggy continues to invest in technology and logistics, focusing on better unit economics through efficient operations and increased advertising revenue, it aims to strengthen its margins while navigating the challenges posed by rising competition and delivery costs. Swiggy's strategic initiatives position it well for sustained growth and profitability, said the IPO note from SMIFS.

"We recommend to subscribe to the issue as a good long term investment for the growth seeking investor due to the abnormal growth cliff the sector is expected to see over the next decade driven by rising per capita incomes and urbanisation, add to that the expansion Swiggy is undertaking and the issue price being at a discount to its only listed peer on an EV/sales basis," 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.

Swiggy’s unified app approach with adjacent categories, engaged user base, and on-demand delivery network creates meaningful opportunities for its restaurant partners, merchant partners and brand partners to engage with its user base at low incremental costs, said AUM Capital, recommending a 'subscribe' to the issue for long term.

"An increase in disposable income amongst the young earning population coupled with a longing for quality and a variety of food staff has made the online food delivery industry a popular choice. The industry is projected to cross Rs 2 lakh crore by 2030, growing at a CAGR of 18 per cent," it added.

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.