Swiggy IPO: Food Giant Likely To Open $11.3 Billion IPO For Subscription After November 6; Say Reports

Swiggy, one of India's largest online food delivery platforms, is preparing to go public with an initial public offering (IPO) in November 2024, seeking a valuation of $11.3 billion. This marks a notable reduction from its previous target of $15 billion, attributed to current market conditions and a desire to appeal to a broader base of retail investors. Despite reducing its valuation, Swiggy remains one of the most anticipated listings this year, as it eyes opportunities to expand its market reach and strengthen its stance against industry players like Zomato.

Why Swiggy Lowered Its Valuation Target?

Swiggy's decision to adjust its IPO valuation follows a challenging period in the Indian equity markets, impacted by factors such as persistent foreign fund outflows, high valuations, and global geopolitical tensions. In recent weeks, the Indian stock market has witnessed significant corrections, with major indices like the Nifty 50 and the Sensex undergoing their longest weekly losing streak in 14 months. Swiggy's peer, Zomato, also experienced a price dip.

Reports that the IPO is scheduled to open for public subscription shortly after November 6, 2024. The company aims to generate greater retail investor interest by listing at a comparatively modest valuation.

Swiggy's Peers and Market Context

Swiggy's primary competitor, Zomato, is a key player in the online food delivery market, with a market capitalization of Rs 2,24,310.54 crore, surpassing Swiggy's projected valuation of $11.3 billion. Zomato's extensive portfolio, which includes the B2B business Hyperpure and quick-commerce service Blinkit, enables it to capture revenue streams beyond food delivery alone. Recently, Zomato's acquisition of Paytm's ticketing business further diversified its service offerings.

However, Zomato's shares have recently been affected by the current bearish market sentiment, dropping from Rs 265.70 to Rs 253.85 on the BSE in the past week. This market correction, is driven by factors such as lackluster corporate earnings and investor caution amid geopolitical uncertainty.

Details of Swiggy's Upcoming IPO

The Swiggy IPO will consist of a fresh equity issue amounting to Rs 3,750 crore, alongside an offer-for-sale (OFS) of 18.52 crore shares held by existing shareholders, as indicated in its updated draft red herring prospectus-I (UDRHP-I). Additionally, the company is considering a pre-IPO funding round, which could adjust the size of the new equity issuance depending on the funds raised.

Swiggy's roadshow will kick off on October 30, 2024, with stops in various cities across India to engage potential investors. The IPO is structured to cater to a diverse range of investors, including qualified institutional buyers (QIBs), mutual funds, and non-institutional investors. One-third of the allocation for non-institutional investors will be reserved for those bidding between Rs 2 to Rs 10 lakh, while the rest will target investors placing bids over Rs 10 lakh. A separate retail allocation will ensure access for smaller investors.

The book-running lead managers (BRLM) for the IPO include notable financial institutions such as 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 issue's registrar. The IPO has gained traction among foreign investors, with over 30 international entities expected to anchor the book.

Financial Health and Recent Performance

Swiggy's operational journey has been marked by a trajectory of heavy investments and ongoing challenges in achieving profitability. According to its confidential pre-filed documents, accepted by the Securities and Exchange Board of India (SEBI) in September, Swiggy has consistently recorded net losses. However, these losses are gradually narrowing, with a reported net loss of Rs 2,350.24 crore in FY24, down from Rs 4,179.30 crore in FY23 and Rs 3,628.89 crore in FY22.

Meanwhile, Swiggy's revenue from operations has shown growth, reaching Rs 11,247.39 crore as of March 31, a significant rise from Rs 8,264.59 crore in the previous fiscal year. The company's cash flows remain under pressure, but the narrowing losses and revenue growth signal gradual progress toward profitability.

Swiggy's capital journey has been substantial, with approximately $3.62 billion raised across 15 funding rounds from a consortium of over 50 institutional investors and a select group of angel investors. In a notable financing round led by Invesco in 2022, Swiggy secured $700 million, which helped double its valuation to $10 billion at that time. Recently, the company adjusted its initial IPO valuation target from $12.5-$13.5 billion down to $11.3 billion in line with current market dynamics.