Swiggy’s ₹11327 Crore IPO Debuts Strongly, Faces Mixed Investor Sentiment

Swiggy’s ₹11,327 crore IPO debuted strongly on November 13, listing at ₹420 on the NSE, nearly 8% above the issue price. Despite early gains, shares faced volatility, dipping 5% by mid-morning. Analysts were divided, with Macquarie rating it “underperform” while StoxBox sees long-term growth potential in the quick commerce sector.

CONTENTS:

• Swiggy IPO receives cautious investor response.
• Swiggy IPO boosts employee wealth creation.
• Swiggy IPO receives mixed investor reactions.

Swiggy’s ₹11327 Crore IPO Debuts Strongly, Faces Mixed Investor Sentiment

Swiggy IPO receives cautious investor response

Swiggy’s ₹11327 Crore IPO Debuts Strongly Swiggy’s IPO made a subdued debut on the stock market, listing at an 8% premium above its issue price. The company, which is currently incurring losses at the consolidated level and is expected to take 2-3 years to reach profitability, has caused investors to be cautious.

On its listing day, brokerage firms Macquarie and JM Financial provided contrasting views. Macquarie initiated coverage with an “underperform” rating and a target price of Rs 325, implying a 17% downside from the IPO price of Rs 390. The brokerage acknowledged Swiggy’s long-term growth potential but highlighted the challenging path to profitability. Macquarie forecasts the company will reach group EBIT break-even only by FY28, even with a 23% core revenue growth rate, and noted that while Swiggy’s contribution margin is comparable to Zomato’s, there is a significant gap in their adjusted EBITDA margins.

On the other hand, JM Financial gave Swiggy a “buy” rating, with an upside potential of 21% and a target price of Rs 470. They believe Swiggy can grow by improving margins and controlling unit economics, especially if it can leverage the successful IPO and leadership changes at Instamart. JM Financial valued Swiggy’s food delivery segment at a lower multiple than Zomato’s, due to Swiggy’s historical execution challenges and profitability gap.

Despite being the second-largest player in the e-commerce and food delivery market, Swiggy’s IPO was met with a lukewarm response. Investors were concerned about the company’s negative cash flow model, high competition, and the overall negative market sentiment. Analysts have advised that only high-risk investors should consider holding Swiggy shares for the long term, while others may want to wait for a better entry point.

Swiggy IPO boosts employee wealth creation

Swiggy’s ₹11327 Crore IPO Debuts Strongly  Swiggy’s shares debuted with a 7.7% gain in pre-open trade on November 13, following strong demand for its $1.4 billion initial public offering (IPO), which was oversubscribed by more than three times. The stock listed at Rs 420 on the National Stock Exchange, surpassing the issue price of Rs 390. This IPO is considered one of the most significant wealth creation events in India’s startup ecosystem, with around 500 employees set to become part of the ‘Crorepati’ club. The IPO will unlock Rs 9,000 crore in employee stock options (ESOPs), establishing Swiggy as a prominent player in India’s startup landscape, comparable to Flipkart.

Swiggy’s ESOP payout is among the largest in the sector, rivaling Walmart-owned Flipkart’s estimated $1.4-1.5 billion payout. Notable employees granted significant ESOPs under the 2024 plan include Sriharsha Majety, cofounder and CEO, with Rs 1,894 crore; Amitesh Jha, CEO of Instamart, with Rs 126 crore; and Rohit Kapoor, CEO of Food Marketplace, with Rs 92 crore. Other top management members, including CFO Rahul Bothra and CTO Madhusudhan Rao, were also allocated substantial ESOPs worth Rs 81 crore each.

Swiggy received a special exemption from the Securities and Exchange Board of India (SEBI) in July, allowing employees to sell shares just one month after the IPO, bypassing the typical one-year lock-in period. According to reports, Swiggy’s founders and senior management were allocated nearly Rs 2,600 crore worth of ESOPs in the latest plan. A total of nine top employees will see their wealth increase by Rs 50 crore or more.

Swiggy IPO receives mixed investor reactions

Swiggy’s ₹11327 Crore IPO Debuts Strongly  Swiggy shares made a strong debut on the stock exchanges on November 13, listing at Rs 420 per share on the National Stock Exchange (NSE), which was nearly 8% higher than the IPO price of Rs 390. On the Bombay Stock Exchange (BSE), the stock opened at Rs 412, a 5.6% premium, and later rose by 7.67% to Rs 419.95. This marked a positive start despite earlier subdued expectations in the grey market, where the stock had a flat premium. However, Swiggy shares experienced some volatility, dipping nearly 5% to Rs 400.45 on the NSE around 10:20 AM, reflecting mixed investor sentiment.

Swiggy’s Rs 11,327 crore IPO was fully subscribed on the final day of the offering, with 3.59 times subscription. The IPO price range was between Rs 371-390 per share.

Despite the positive listing, global brokerage Macquarie initiated coverage with an “underperform” rating and a target price of Rs 325 per share, citing potential challenges in Swiggy’s path to profitability. On the other hand, Akriti Mehrotra from StoxBox recommended holding Swiggy shares for the medium- to long-term, noting its potential in the growing quick commerce sector.

Swiggy operates in India’s rapidly expanding online food delivery and quick commerce markets, which saw significant growth from Rs 112 billion in 2018 to Rs 640 billion in 2023, and is expected to reach Rs 1,400-1,700 billion by 2028. Swiggy is well-positioned to capitalize on these trends, especially in smaller cities where demand for convenience is rising. The company is also focusing on expanding its Instamart service and closing the market share gap with competitors like Zomato and Blinkit.