Swiggy IPO: Food Delivery Giant Revises Valuation Downwards By 10-16% Amid Market Volatility; Check

Swiggy, one of India's leading food delivery platforms, is gearing up for its much-anticipated initial public offering (IPO) in November. However, the company has recently revised its valuation target, lowering expectations due to ongoing market volatility. Swiggy now aims for a valuation of $12.5 billion to $13.5 billion, a 10-16% cut from its earlier goal of $15 billion.

According to Reuters, Swiggy initially aimed for a $15 billion valuation, hoping to raise $1.4 billion in its IPO. This would make it India's second-largest IPO in 2024, following Hyundai Motor India's market debut earlier in the same month. However, heightened market volatility and corrections in the Indian stock market have prompted Swiggy to reassess its target. By opting for a more conservative valuation, the company aims to ensure "a lot of value is left on the table" for investors who participate in the offering, maintaining investor interest despite market uncertainties.

The revised target comes against the backdrop of a broader downturn in Indian equities. The benchmark Nifty 50 index is poised to log four straight weeks of losses, falling by as much as 7.15% from record highs reached on September 27. Persistent selling by foreign institutional investors has put pressure on the market, prompting caution among companies planning IPOs. Hyundai India's shares, for instance, dropped 7.2% on their debut due to concerns over high valuations and challenges in the auto industry.

Swiggy IPO Details and Timeline

Swiggy's IPO, backed by SoftBank and Prosus, is slated for November 13, 2024, with the subscription window opening a week prior. However, the dates could shift slightly depending on market conditions. Swiggy will begin its roadshows to drum up interest in the IPO starting October 30.

The IPO will include a fresh issuance of equity shares worth Rs 3,750 crore, as well as an offer-for-sale (OFS) of 18.52 crore shares from existing shareholders. The OFS will allow early investors to partially exit, while Swiggy may also raise additional funds through a pre-IPO round. If successful, the size of the fresh issuance will be adjusted accordingly.

Various categories of investors will be able to participate in the IPO, including qualified institutional buyers (QIBs), anchor investors, mutual funds, and non-institutional buyers. Of the non-institutional category, one-third of the allocation will be reserved for bidders seeking shares worth between Rs 2 lakh and Rs 10 lakh, while the remainder will be available for those bidding for over Rs 10 lakh. Retail investors will also have a separate portion allocated to them.

Financial Performance

While Swiggy remains a dominant player in the Indian food delivery sector, it continues to face financial challenges. As of March 31, 2024, the company's net losses for the fiscal year had narrowed to Rs 2,350.24 crore, down from Rs 4,179.30 crore in FY23 and Rs 3,628.89 crore in FY22. This is a positive sign of improvement, though the company still faces negative cash flows from operations. Swiggy's operating revenue also saw growth, rising to Rs 11,247.39 crore in FY24 compared to Rs 8,264.59 crore in FY23 and Rs 5,704.89 crore in FY22.

Despite these improvements, Swiggy remains in fierce competition with Zomato, its primary rival in the Indian food delivery space. Both companies are betting heavily on the rapid growth of "quick commerce"-the ultra-fast delivery of groceries and other essentials within 10 minutes. Zomato, already listed on Indian stock exchanges, has a price-to-earnings (P/E) ratio of 742.50.

IPO Structure and Key Players

The IPO will be managed by a team of book-running lead managers (BRLMs), including Kotak Mahindra Capital Company, Citigroup Global Markets India Private Ltd, Jefferies India Private Ltd, and Avendus Capital Private Ltd. Link Intime India Private Ltd has been appointed as the registrar for the issue. Swiggy's confidential offer document was accepted by India's capital markets regulator, the Securities and Exchange Board of India (SEBI), in September, following the submission of a draft prospectus using the confidential pre-filing process in April.

Funding History

Since its inception, Swiggy has raised significant capital, securing approximately $3.62 billion across 15 funding rounds, according to data from Tracxn. The company has attracted over 50 institutional investors, including SoftBank, Prosus, and angel investors. In 2022, Swiggy raised $700 million in a funding round led by Invesco, which doubled its valuation to $10 billion. While the company's valuation has fluctuated since then, it is now targeting a $10 billion valuation for its IPO.