Swiggy IPO listing: The debut of the food and grocery firm’s shares on the stock exchanges?

Almost 60 per cent of the IPO proceeds will go to several existing shareholders and investors. Among them, MIH India Food Holdings, an affiliate of Prosus NV, is the largest shareholder in Swiggy, holding a 30.93 per cent stake, followed by Accel India which owns a 4.71 percent stake and Tencent Cloud 3.64 per cent stake. Sriharsha Majety, Managing Director & Group CEO, and Lakshmi Nandan Reddy Obul (Wholetime Director – Head of Innovation), founders of the company, hold 5.36 per cent and 1.75 per cent stakes, respectively.

Demand from retail and other investors

The IPO of Swiggy was oversubscribed nearly 4 times. The IPO received applications for 57.53 crore shares as against the total offering 16.01 crore shares. Retail investors placed bids for 3.31 crore shares as against the total retail quota of 2.89 crore shares, with the portion getting subscribed 1.14 times. The IPO received 52.31 crore bids from QIBs as against 8.69 crore shares offered, representing an oversubscription of 6.02 times.

Non-institutional investors (NII) placed applications for 1.79 crore shares, as against the total offering of 4.35 crore.

Analysts take

Analysts said Swiggy’s shares are likely to get listed flat or at a discount to the offer price and have also recommended investors, who have not been allotted the shares in the IPO, to have a cautious approach. Waiting for the share price to settle before buying in the secondary market has been advised.

According to a note by Mehta Securities, despite being the second-largest e-commerce and food delivery player, the Swiggy’s IPO received a sluggish response from investors. While on a consolidated basis, the overall subscription figures look good, but on day-3 Qualified Institutional Buyers (QIB) supported the IPO.

The note said that the majority of investors, especially NII’s and retail stayed away for a few reasons such as a negative cash flow business model, followed by concerns over high competition and ongoing negative market mood.

“Considering low subscription demand from NII’s and retail investors followed by market sentiments, there is a very high possibility of flat to negative listing in the range of +/- 5-10 per cent on its issue price,” Mehta Securities said.

It said investors who have been allotted Swiggy IPO, should not expect any kind of listing gains.

“Hence, only risky investors should consider the company to “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 the space with better-discounted opportunity,” the note said.

IPO proceeds utilisation

As per the red herring prospectus (RHP), Swiggy proposes to deploy the net proceeds towards investment in the material subsidiary, Scootsy, for repayment or pre-payment, in full or in part, of certain or all of its borrowings, expansion of its Dark Store network for its quick commerce segment through setting up of more such stores, investment in technology and cloud infrastructure, brand marketing and business promotion expenses for enhancing the brand awareness and visibility of its platform, and funding inorganic growth through unidentified acquisitions and general corporate purposes.

Scootsy services include warehouse management to streamline operations, in-warehouse processing that includes value-added services to enhance product delivery, and efficient order fulfilment which enables efficient order picking, packing, and shipping processes for the wholesalers and retailers.

Swiggy plans to invest Rs 1,178.7 crore in Scootsy, for expansion of the Dark Store network for the quick commerce segment and to make lease/ license payments for Dark Stores. As of June 30, 2024, Swiggy has a total of 581 open Dark Stores spread across 32 cities in the northern, western, eastern and southern regions of the country.

For brand marketing and business promotion expenses for enhancing the brand awareness and visibility of its platform, across segments, it plans to invest Rs 1,115.3 crore.

Financial performance

Swiggy has been making losses in the past couple of years. It made a loss of Rs 2,350.24 crore in FY24 as against a loss of Rs 4,179.3 crore in FY23. Its total income for FY24 was Rs 11,634 crore as against Rs 8,714 crore a year ago. It made a loss of Rs 611 crore in the June quarter of FY25 as against Rs 564 crore a year ago while its total income during the quarter was Rs 3,310 crore (Rs 2,509 crore).