Swiggy delivers 17% gains on stock market debut; Mcap tops Rs 1 trillion

The gains came despite overall market weakness amid sustained selling by foreign portfolio investors

Defying weak market conditions and a tepid initial public offering (IPO) response, food delivery major Swiggy

 

registered a 17 per cent gain on its stock market debut on Wednesday.

 

Shares of the company closed at Rs 456 apiece, up 17 per cent, above the issue price of Rs 390. The stock reached a high of Rs 464 and a low of Rs 391 on the

 

NSE, where Rs 4,844 crore worth of shares changed hands. At the close, Swiggy was valued at Rs 1.04 trillion, making it the 85th most valuable company in India. The gain comes despite overall market weakness amid sustained selling by foreign portfolio investors (FPIs). On Wednesday, Nifty extended its drop from the peak hit on September 26 to 10 per cent.

 

Swiggy’s Rs 11,327 crore IPO, the second biggest this year, garnered just 3.6 times subscription, with over 90 per cent of bids from institutional buyers. Additionally, Hyundai Motor India’s weak listing on October 22, following its Rs 27,870 crore IPO, had dampened sentiment toward primary share sales. 

 

Experts said Swiggy’s positive listing could boost the IPO pipeline and share sales by tech startups. IPO mobilisation for 2024 has already surpassed the previous record of Rs 1.19 trillion in 2021, with more than 70 companies raising more than Rs 1.2 trillion.

 

Market players said Swiggy’s valuation gap with market leader Zomato propelled its gains. Zomato, which listed in 2021, is currently valued at Rs 2.28 trillion.

 

“Swiggy, India’s number-two consumer app, has a clear path to catch up with leader Zomato in food delivery,” said a Macquarie note. “Swiggy’s contribution margin is nearly on par with Zomato’s. At the adjusted earnings before interest, taxes, depreciation, and amortisation margin level, the gap is wider due to Swiggy’s smaller gross order value base, which limits its ability to absorb higher central branding and employee costs. We expect Swiggy to bridge this profitability gap with about 30 per cent more transacting users,” the note added.

 

Macquarie has a target price of Rs 325 for Swiggy but in a “blue-sky” growth scenario. it sees the fair value at Rs 700.

 

Through the IPO, Swiggy has raised fresh capital of Rs 4,499 crore, which it will use to expand its dark store network, invest in technology, Cloud infrastructure, fund brand marketing and business promotion, and support inorganic growth.

 

The IPO also comprised Rs 6,828 crore secondary share sale by 10 investors, which includes Tencent, Accel India and Apoletto Asia. The acquisition cost for the selling shareholders ranges between Rs 11.2 and Rs 165.5 per share.

 

“The listing reflects a degree of optimism about Swiggy's long-term growth prospects, driven by its strong brand recognition, extensive network, and dominant position in the food delivery market. However, the company's continued losses and the challenging market conditions may temper investor enthusiasm in the long term,” said Shivani Nyati, head of wealth, Swastika Investmart.