Swiggy IPO opens today: Here's what brokerage firms say about this issue

Swiggy has launched its initial public offering (IPO) for bidding on Wednesday, November 6 and the issue can be subscribed until Friday, November 8. The food platform to quick-commerce company is selling its shares in the price band of Rs 371-390 apiece, for which investors can apply for a minimum of 38 equity shares and its multiples thereafter.

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 Rs 11,327.43 crore IPO of Swiggy includes a fresh share sale of Rs 4,499 crore and an offer-for-sale (OFS) of up to 17,50,87,863 equity shares by its existing selling shareholders amounting to Rs 6,828.42 crore. Bengaluru-based Swiggy is a professionally managed company, with no identifiable promoters.

Net proceeds from the issue shall be utilized towards investment in the Material Subsidiary, Scootsy; for repayment or pre-payment of certain borrowings; making lease/license payments for dark Stores; investment in technology and cloud infrastructure; brand marketing; and business promotion expenses; funding inorganic growth and general corporate purposes.

Ahead of its IPO, Swiggy raised 5,085.02 crore via anchor investors by allocating 13,03,85,211 shares for Rs 390 apiece. Its anchor book included names like New World Fund, Fidelity, Omnis Portfolio Investments, Nomura, PGGM World Equity, Citigroup,  Blackrock, Carmignac, Eastspring Investments, TOCU Europe, Integrated Core Strategies, CLSA, Matthews Asia Funds, Societe Generale and more.

As of June 30, 2024, Swiggy carried a selection of approximately 19,000 SKUs of grocery and household items. Swiggy's Instamart operated a large network of 557 Active Dark Stores across 32 cities in India as of June 30, 2024 and Instamart operated a network of 605 Active Dark Stores across 43 cities in India as of September 10, 2024.

Swiggy's platform enables restaurant reservations (Dineout) and event bookings (SteppinOut), product pickups/deliveries (Genie) and other hyperlocal commerce activities (Swiggy Minis and others). The company also offers a membership program called 'Swiggy One' with discounts and offers, in-app payment solutions such as a digital wallet and a Swiggy-HDFC Bank credit card.

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.

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. Here's what a host of brokerages said about the IPO of Swiggy:

Motilal Oswal Financial Services
Rating: Subscribe for long-term
Swiggy operates in a oligopoly market which is at a nascent stage, thus providing enough opportunities for players to create their niche. Swiggy’s innovation DNA is key to success and it could again be at the forefront through its new 10-minute food delivery offering, said Motilal Oswal Financial Services.

"However, given that the company is still loss making at an aggregate level, and overall profitability may be some time away, we recommend only High Risk investors to ‘Subscribe for long term’. The issue is priced at 7.8 time FY24 Mcap to sales and looks reasonably priced compared to Zomato which is trading at 17.5 times," it said.

KR Choksey Finserv
Rating: Subscribe
The expansion of dark stores coupled with the introduction of non-grocery categories, aims to boost basket sizes and fulfill increasing consumer demand. Swiggy's customer-centric approach, characterized by high transaction frequency and a personalized user experience, ensures strong retention rates and a widening gap in Monthly GOV per MTU, said KR Choksey.

"Given these strengths and the projected growth of the online food delivery and Quick Commerce markets, Swiggy is poised for sustained growth. At the upper price band the company is valued at 8 times Price to Sales, offering a 76 per cent discount to its competition. Hence, we assign a 'subscribe' rating," it added.

SBI Securities
Rating: Subscribe for long-term
Swiggy is valued at price/sales, EV/sales and P/BV multiple of 7.8 times, 7.3 times and 7.1 times respectively of its FY24 financials on post issue capital. While comparing with Zomato, the issue appears to be fairly priced on all these parameters," said SBI Securities. "We recommend investors to subscribe the issue for a long-term investment perspective," it said.

Canara Bank Securities
Rating: Subscribe for long-term
Swiggy’s strong growth trajectory, focus on operational efficiency, and innovations in service expansion provide substantial opportunities. The company’s strategic focus on profitable growth in food delivery, along with an ambition to turn its quick commerce division profitable shortly, aligns with its long-term vision of sustainable growth, said Canara Bank Securities.

"Swiggy’s position as a leader in food delivery and quick commerce, supported by a robust, unified platform, provides it with a strong foundation to capture future growth opportunities in India’s large and expanding market. We recommend 'subscribe' to this issue for long-term gains," it added.

Swastika Investmart
Rating: Subscribe with caution
Swiggy is a leading player in the emerging e-commerce and food delivery sector. It has reported a steady revenue growth but remains a loss-making company. The IPO has a negative P/E; however, based on other metrics the valuation appears reasonable. Current market conditions could further impact subscription and listing performance, said Swastika with high risk investors to apply for a long term.

Arihant Capital Market
Rating: Subscribe with caution
In FY24, Swiggy reported a revenue of Rs 3,222.2 crore, growing 34.8 per cent YoY, and net loss of Rs 611 crore. Swiggys' growth strategy faces notable challenges. While it aims to expand services and partnerships, reducing discounts may impact customer loyalty, and relying heavily on advertising and premium offerings might not be sufficient to drive profitability, said Arihant Capital.

"Despite efforts to improve operational efficiency, the intense competition and current negative financial metrics raise concerns about long-term viability. At the upper band of INR 390, the issue is valued at a negative PE of 37.40 based on FY24 EPS of Rs -10.5. We are recommending “Subscribe for aggressive investors” to this issue," it said.

Marwadi Financial Services
Rating: Subscribe
Considering the FY24 Sales of Rs 11,247 crore, Swiggy is going to list at a Mcap/sales of 7.76 times with a market cap of Rs 87,298.60 crore, whereas its peer namely Zomato is trading at Mcap/sales of 18.37 times, said Marwadi Financial Services.

"We assign 'subscribe' rating to this IPO as the company has a consistently growing network of users and rising user engagement on platform. Also, it is available at reasonable valuation as compared to its peer," it said.

StoxBox
Rating: Subscribe for long-term
The management remains confident that its strategy, including expanding its dark store network, optimising logistics, and broadening its product range, will turn operations profitable in the coming years. The company aims to narrow its market share gap with rivals Zomato and Blinkit, accelerating its Instamart service and enhancing customer engagement, said StoxBox.

"Swiggy’s innovation-driven approach positions it for long-term growth in the food delivery and quick commerce segments. Given its strong market presence, strategic expansion plans, and potential for profitability, we recommend a 'subscribe' rating for the issue with a medium to long-term investment perspective," it said.

Mehta Equities
Rating: Subscribe for long term
Mehta Equities believes Swiggy has been more efficient in customer acquisition than its competitor Zomato, driven by its unified app model,which enhances cost efficiency and supports user growth. The company’s expansion into Tier 2 and Tier 3 cities,along with its inclusion of groceries and medicines, bolsters its path to profitability.
 

"Given its consistent innovation and strategic expansion, we believe Swiggy’s is well-positioned for sustained growth. Making it a compelling opportunity for investors seeking exposure in the evolving hyperlocal commerce space. Hence, by looking at all attributes we recommend investors to 'subscribe' to Swiggy for long term perspective," it said.

Sushil Finance
Rating: Subscribe for caution
India’s growing market and the ability to tap smaller cities is a huge opportunity for Swiggy. Looking at all the factors, risks, opportunities and valuation, aggressive investors can apply with a long term view or investors can wait to invest for numbers to turn positive, said Sushil Finance.

"However, risks to consider for the company are intense competition, pricing pressures, regulatory challenges, high operational cost, dependency on third party restaurants, negative cash flow, managing dark stores are the key concerns for the company," it said.