Brokerage Motilal Oswal acknowledged that Swiggy pioneered the hyperlocal commerce industry in India, launching food delivery in 2014 and quick commerce in 2020, and is well-recognised as a leader in innovation.
Swiggy operates in an oligopoly market which is at a nascent stage, thus providing enough opportunities for players to create their niche.
Motilal analysts remarked that the food delivery platform’s innovation DNA is key to success and it could again be at the forefront through its new 10-minute food delivery offering.
However, they reckoned that the company is still loss-making at an aggregate level, and overall profitability may be some time away.
- Also read: Swiggy IPO subscribed 25% so far on Day 2
The brokerage has recommended only high-risk investors to ‘subscribe for long term’. “At the upper price band of ₹390, the issue is priced at 7.8x FY24 market cap to sales and looks reasonably priced compared to Zomato which is trading at 17.5x,” it said.
The IPO targets ₹11,327.43 crore through a combination of fresh issue worth ₹4,499 crore and offer for sale of 17.51 crore shares worth ₹6,828.43 crore. It will close tomorrow, November 8, 2024.
Risk factors
Swiggy has incurred net losses since incorporation and has negative cash flows from operations. If it fails to generate adequate revenue growth and manage its expenses and cash flows, it may continue to incur losses.
In addition, If it fails to retain its existing user base or fail to acquire new users in a cost-effective manner, the business, financial condition and results of operations could be adversely affected.
Managing dark stores is critical to its quick commerce business and failure to do so in a cost-effective way may have an adverse effect on its business, financial condition and results of operations.