Food delivery giant Swiggy’s initial public offering (IPO), which will be open for subscription from 6-8 November, is priced at a range of ₹371 to ₹390.

After a correction in stock market, the company has reduced its estimated valuation of the IPO to $11.3 billion, i.e., 25 per cent less than the earlier estimation of $15 billion.

The proceeds will support Swiggy’s strategic initiatives, including dark store expansion, Instamart’s quick commerce operations, technology infrastructure upgrades, and brand promotion efforts.

Additionally, debt repayment and acquisitions are on the agenda, with the funds allocated as follows: 26 per cent for dark store expansion, 24.8 per cent for brand promotion, 15.6 per cent for technology and cloud infrastructure, and 29.7 per cent for inorganic growth and corporate expenses.

Analysts believe that Swiggy being an IPO could draw investors’ interest for some listing gain chances.

While Swiggy has tremendous growth potential as it heads into its IPO, the company faces the challenge of competing against Zomato’s established market leadership.

“Swiggy needs to strategically leverage the proceeds from its IPO to narrow the gap in market share with Zomato. Expanding its services into new segments and cities will be vital. Swiggy also needs to accelerate Instamart to compete more strongly with Blinkit in quick commerce. This can be done by expanding its network of dark stores, optimising logistics for faster delivery, increasing its product range, and enhancing customer engagement through strategic partnerships and technology integration,” according to a report by Kotak Securities.

The report noted that Swiggy has made significant strides in reducing its losses, demonstrating a commitment to improving financial health and moving towards profitability.

“The company’s innovative use of technology, such as AI and data analytics, enhances customer experience and optimises delivery operations, maintaining its competitive edge over rivals like Zomato. For long-term investors, Swiggy offers an attractive high-risk, high-reward bet on the future of food tech in India,” it added.

Swiggy’s competitor Zomato is currently trading at a trailing P/E of 297x, whereas the former’s ratio stands at -35.23x. However, Swiggy’s price range is positioned higher than Zomato’s current trading price of ₹247 at the close of the session on October 30.

Swiggy’s pre-IPO earnings per share (EPS) is calculated based on pre-issue shareholding, as stated in the Red Herring Prospectus (RHP), and the latest earnings for the fiscal year ending March 31, 2024.

Swiggy shares are currently trading at a GMP of ₹22-25, indicating an approximate 6.41 per cent listing gains, as per data from Investorgain. This is a significant drop from the earlier projected GMP of ₹130 on October 29 on IPO Watch, reflecting dampened sentiment in the grey market. However, GMP remains a speculative indicator and does not always match with the actual listing price.

On the financial front, Swiggy reduced its losses for FY24 to ₹2,350.2 crore, down from ₹4,179.3 crore the previous year, while revenue from operations grew by a robust 36 percent to ₹11,247.4 crore, up from ₹8,264.6 crore. In Q1 FY25, the company reported a loss of ₹611 crore, which widened slightly from ₹564 crore in the same period the prior year. However, quarterly revenue surged by 35 percent to ₹3,222.2 crore.

According to reports, the IPO is off to a strong start, with the anchor book attracting substantial interest from both global and domestic investors.

The $600 million anchor book was oversubscribed 25 times, attracting bids of $15 billion. Among key investors vying for a piece of the IPO are global investment firms Fidelity, Capital Group and Norges Bank Investment Management.

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