After successfully raising ₹11,300 crore through initial public offering (IPO), foodtech major Swiggy has finally debuted on the domestic stock exchanges on Wednesday. The share price of Zomato's fierce rival in the food delivery space listed at ₹420 on the NSE, a premium of 7.7% over the issue price of ₹390 apiece. On the BSE, the stock kickoff trading at ₹412 per share, up 5.6% over the IPO price.
The listing of Swiggy was better than Street expectations as the online food delivery company was trading flat in the grey market. The grey market premium (GMP) of Swiggy shares have dropped significantly in recent days, from ₹9.50 on the day of opening of the IPO to zero today.
“This performance is better than expected, considering the moderate subscription of 3.59 times and the initial muted investor response reflected in the low grey market premium,” says Shivani Nyati, Head of Wealth at Swastika Investmart Ltd.
“The listing reflects a degree of optimism about Swiggy's long-term growth prospects, driven by its strong brand recognition, extensive network, and dominant position in the food delivery market. However, the company's continued losses and the challenging market conditions may temper investor enthusiasm in the long term,” she says.
She advised investors to approach Swiggy with a balanced perspective, considering the potential for future growth and the associated risks. “Those who are holding it may keep a stop at around the issue price,” she adds.
Prashanth Tapse, Senior VP (Research), Mehta Equities, says despite subdued market mood and sluggish response from overall investors, Swiggy listing surprised the market participants. “Positive listing and price holding above its issue price of ₹390 should be seen as strong demand for the company. This shows investors are positive on the space and fear of missing out factor is holding investors not to miss the sector growth story, similar to ZOMATO post listing trend.”
“For allotted investors, HOLD FOR LONG TERM despite knowing short term volatility and competitive pressures in the sector. For non-allottees, we advise to wait and watch for the price to settle and revisit to buy near issue price if we get due to market selloff pressure,” says Tapse.
Despite being the second-largest e-commerce and food delivery player, the highly anticipated IPO of Swiggy received a luckwarn response for its issue, which was offered at a price band of ₹371-390 per share between November 6-8. The issue was subscribed 3.59 times on the final day, after garnering 0.12 times subscription on Day 1, followed by 0.35% times on Day 2. The IPO managed to fully subscribe as retail investors and qualified institutions buyers (QIB) lined up to subscribe the issue. The public issue was subscribed 1.14 times in the retail category, 6.02 times in QIB, and 0.41 times in the non-institutional investor (NII) segment. The portion reserved for employees was booked 1.65 times.
Tapse of Mehta Equities believes that the majority of the investors, especially non-institutional and retail, stayed back for a few reasons like negative cash flow business model followed by concern on high competition and ongoing negative market mood.
The IPO of Swiggy had garnered mixed response from brokerages, with most recommending investors to subscribe only for the long-term, citing its negative bottomline and cash flows; and intense competition from fierce rival Zomato as well as Zepto and other new players in the quick commerce space.
Swiggy has been reporting consistent net losses since its establishment in 2014, primarily due to high operational costs. In contrast, its listed competitor, Zomato, has recently achieved profitability in the food delivery segment and break-even in the quick commerce business. It is notable that Deepinder Goyal-led Zomato’s business is bigger than that of Swiggy, commanding around 58% market share in the food delivery business and 40-45% in quick commerce.