Swiggy, the food delivery giant, has captured everyone’s attention as it rolls out its highly anticipated ₹11,327 crore initial public offering (IPO). This IPO, marked as one of the biggest in India this year, opened on November 5 and will run until Friday, aiming to attract retail, institutional, and global investors alike.
So, should investors hop on this IPO train? Here’s what analysts and market insiders have to say.
Strong Backing from Anchor Investors
Swiggy’s IPO started on a high note, raising ₹5,085 crore from anchor investors at the top-end price of ₹390 per share. This strong anchor backing featured participation from over 75 domestic and global institutional investors, showing both local and international interest. The anchor allocation attracted some of India’s largest mutual funds like SBI, ICICI Prudential, and Kotak, alongside prominent insurance players.
Internationally, heavyweights like Capital Group, Fidelity, and BlackRock showed their support, with contributions from notable sovereign wealth funds and pension funds from Norway, Canada, and the UK.
The anchor round saw renewed commitments from several big names, indicating confidence in Swiggy’s long-term potential even amidst current market volatility. With such a stellar lineup of supporters, it’s clear Swiggy has the right kind of initial push. But does that translate into a surefire win for retail investors?
IPO Structure and Fund Allocation
Swiggy’s IPO offers a fresh issue of 11.54 crore shares, raising about ₹4,499 crore. The remaining ₹6,828 crore will come from existing shareholders selling their stakes. At an IPO price band of ₹371-390 per share, retail investors can jump in with a minimum lot of 38 shares.
Funds from this IPO will be channeled towards various growth initiatives. Swiggy plans to invest ₹1,343.5 crore in Scootsy, its logistics arm, and ₹703 crore in technology infrastructure. A sizeable chunk, ₹1,115 crore, is also set aside for brand marketing and business promotion, aiming to boost Swiggy’s visibility and market reach. The remaining funds will go towards acquisitions and general corporate purposes, fueling the company’s plans for aggressive expansion.
Should You Subscribe?
Despite the strong backing and robust allocations, the grey market is showing a modest premium of ₹20 per share, around 5% above the upper price band. In simpler terms, there isn’t a strong indication of massive listing day gains. This sentiment is further echoed by analysts who recommend a cautious approach, largely due to Swiggy’s financials and the current market climate.
Analysts point out that while Swiggy holds a healthy 40% market share, it has yet to achieve profitability—a key factor that holds back bullish sentiment. Zomato, Swiggy’s main competitor, is already profitable and has a larger 60% market share, trading at a higher price-to-sales ratio of 10 times compared to Swiggy’s six times. Swiggy’s reduced valuation of $10.2 billion, down from $14 billion, has made the IPO more attractive, but many analysts still recommend a longer-term hold.
What the Analysts Say
Most market experts are advising investors to manage expectations. Hemang Jani from Finazenn points out that Swiggy may not see a bumper listing due to weak market conditions. He notes that while short-term gains may be limited, Swiggy has potential to deliver returns of 25-30% over a two to three-year period.
Krishna Appala from Capitalmind echoes this sentiment, emphasizing that Swiggy is well-positioned for growth over the next three to five years. Though it trails behind Zomato on certain metrics, Appala suggests that Swiggy’s growth trajectory could mirror Zomato’s if it continues to build momentum.
However, Karan Taurani from Elara Capital advises investors to keep their expectations realistic. While Swiggy’s valuation is reasonable, Zomato still offers a more attractive investment due to its scale, profitability, and established track record.
A High-Stakes Game in a Volatile Market
The broader market conditions are another factor investors need to consider. Swiggy’s listing comes on the heels of a volatile market environment, amplified by factors like the US election outcome. Analysts believe this uncertainty could dampen listing gains, with some projecting Swiggy may list at par or see only modest early gains.
Bajaj Broking points out that Swiggy’s financials are still in the red, with a negative P/E ratio due to consistent losses. They see the IPO pricing as “aggressive,” though Swiggy’s management remains optimistic about turning profitable by strategically deploying IPO funds.
Final Verdict – A Bet on Long-Term Growth
Swiggy’s IPO is indeed one of the year’s most-watched, but it’s essential for investors to approach it with a long-term view. If you’re looking for immediate, high returns, this may not be the ideal opportunity. However, for those willing to hold on, Swiggy’s growth potential in a booming food delivery market could make it a rewarding investment down the road.
As Swiggy joins India’s IPO ranks, it stands alongside major public listings like Hyundai Motor India’s record-breaking debut earlier this month. For now, it’s a cautious “yes” from the analysts, but only for those ready to play the waiting game.
