Swiggy IPO Listing: Stock lists at 7% premium over IPO price

Swiggy IPO Listing

Swiggy IPO Listing: Premium Entry at ₹390, but Lags Behind Zomato in Initial Gains

Swiggy’s much-anticipated IPO has finally made its market debut, marking a significant milestone for the food delivery giant.

The ₹11,327.43 crore IPO was the second largest in 2024, following Hyundai Motor’s record-breaking ₹27,870 crore issue.

Despite the excitement surrounding Swiggy’s listing, its stock debut has been comparatively modest, especially when compared to the spectacular market performance of its closest rival, Zomato.

While investors in Swiggy’s IPO enjoyed a decent listing gain, it wasn’t quite the same level of euphoria that Zomato generated during its debut three years ago.

Swiggy IPO: Mixed Investor Response and Modest Listing Premium

Swiggy’s shares were offered at an issue price of ₹390, and the company’s stock debuted with a listing premium of just over 7%.

The shares opened at ₹412 on the Bombay Stock Exchange (BSE) and ₹420 on the National Stock Exchange (NSE), signaling a modest gain for IPO investors.

However, this listing premium was far lower than many had anticipated, given the high-profile nature of the issue and the initial grey market premiums.

Swiggy’s IPO was met with some caution in the grey market, suggesting that many investors expected the stock to list flat or with minimal gains.

The early market action reflected that sentiment as well, with the stock quickly retreating to ₹391 on the NSE before making a strong recovery, jumping to ₹465.80 during the day.

By the close of the first trading session, Swiggy’s shares finished at ₹464, providing IPO investors with a solid return of 18.97% on their investment.

Despite the overall positive movement in the stock price, the volatility of the day reflected the uncertain sentiment surrounding Swiggy’s market performance post-IPO.

Employees, who had received a ₹25 discount on each share, were among the biggest beneficiaries of the listing, as their effective purchase price was much lower, boosting their profits significantly.

A Mixed Subscription Performance Across Investor Categories

Swiggy’s IPO subscription numbers reveal a varied investor response. The overall subscription was 3.59 times, which shows decent demand for the issue, but it wasn’t as overwhelming as some might have expected from a company of Swiggy’s stature.

The subscription figures were uneven across different investor categories, suggesting a certain level of caution or uncertainty about Swiggy’s future prospects.

• Qualified Institutional Buyers (QIBs), which include large institutional investors such as mutual funds, banks, and insurance companies, displayed strong demand for the IPO, with their portion being subscribed 6.02 times. This indicates institutional confidence in Swiggy’s business model and growth potential.
• On the other hand, the Non-Institutional Investors (NII) segment saw tepid demand, with their portion subscribed only 0.41 times. This lukewarm response from high-net-worth individuals and family offices reflects some hesitance among more affluent investors, possibly due to concerns over Swiggy’s profitability and its ability to maintain market leadership in an increasingly competitive food delivery sector.
• The Retail Investors category, which typically shows a broader base of smaller investors, was subscribed 1.14 times, reflecting moderate interest. This is not surprising given that retail investors are generally more price-sensitive and may have been cautious due to Swiggy’s financial losses and the uncertainty of the broader market environment.
• The employee portion of the IPO was subscribed 1.65 times, which is a good sign of internal support for the company’s prospects, though not exceptional.

The IPO Structure: New Shares and Offer for Sale

Swiggy’s IPO was a combination of fresh issue and Offer for Sale (OFS). Under the fresh issue, the company raised ₹4,499 crore, which will primarily be used to fund several strategic initiatives.

A significant portion of the proceeds—₹164.8 crore—will be used to pay down the debt of its subsidiary Scootsy, a last-mile logistics arm.

This move should help improve Swiggy’s balance sheet and reduce interest liabilities.

Another key area for investment is Swiggy’s dark store network, which is set to receive ₹1,178.7 crore.

Dark stores, which are essentially mini-warehouses optimized for hyperlocal delivery, are crucial to Swiggy’s goal of expanding its grocery and essentials business, which has seen rapid growth, especially during the pandemic.

Further investments of ₹703.4 crore are earmarked for enhancing Swiggy’s technology and cloud infrastructure, which should bolster the company’s ability to scale and innovate in the highly competitive food delivery space.

Swiggy also plans to allocate ₹1,115.3 crore for brand marketing and business promotion, signaling the company’s intent to strengthen its brand equity and reach more customers, especially in untapped markets.

Finally, the remaining funds will be used for acquisitions and general corporate purposes, positioning Swiggy for future growth and expansion.

Swiggy’s Financial Health: Losses Narrowing, but Path to Profitability Remains Uncertain

Despite Swiggy’s top-line growth, its financials still show substantial losses. In FY 2024, the company reduced its losses from ₹4,179.3 crore to ₹2,350.2 crore, a positive step in the right direction.

Operational revenue grew by 36% to ₹11,247.4 crore, driven by strong demand for food delivery and groceries.

However, Swiggy remains in the red, and investors will be looking closely at the company’s ability to scale and reach profitability.

In the most recent quarterly report for Q1 FY 2025, Swiggy posted a year-on-year increase in revenue of 35%, totaling ₹3,222.2 crore.

However, its loss also widened slightly from ₹564 crore to ₹611 crore. This increase in losses is a concern, particularly as Zomato—Swiggy’s primary competitor—reported a 388% increase in net profit and a 68% rise in revenue during the same period.

This stark contrast in profitability raises questions about Swiggy’s ability to achieve the same level of financial success as Zomato.

Zomato’s IPO: A Benchmark for Swiggy’s Performance

Swiggy’s IPO debut can’t help but be compared to Zomato’s performance three years ago. Zomato’s IPO, priced at ₹76, was one of the most successful in recent years.

The shares listed at ₹115, providing investors with a 51% listing gain on the first day. The stock surged further, reaching a high of ₹138 before closing at ₹125.85, delivering a 65% return for IPO investors by the end of the first trading day.

Today, Zomato’s stock is trading around ₹260 and hit a record high of ₹298.20 in September 2024, far surpassing its IPO listing price.

In contrast, Swiggy’s market debut has been more muted, reflecting investor concerns over its ability to achieve the same growth trajectory as Zomato, especially given Swiggy’s persistent losses and relatively lower initial premium.

Final Remarks: A Mixed Outlook for Swiggy

Swiggy’s IPO has been a successful event in terms of raising capital, but its market performance on the first day and the mixed subscription numbers suggest that investors are still cautious about its future.

While the company is investing heavily in technology, expansion, and reducing debt, the road to profitability remains uncertain.

Compared to Zomato’s stronger post-IPO performance, Swiggy’s modest listing gain and continuing financial losses indicate that the market is taking a wait-and-see approach.

Nonetheless, Swiggy remains a key player in the Indian food delivery sector with a substantial market share, and its future success will largely depend on how effectively it executes its expansion strategy and reduces its losses.

For now, investors will be watching closely to see if Swiggy can turn its promising top-line growth into consistent profits in the coming quarters.