Swiggy's $1.4 bn IPO oversubscribed as investors bet on quick-commerce boom

Food and grocery delivery firm Swiggy's $1.4 billion initial public offering was oversubscribed on Friday, as institutional investors rushed in with orders on the final day of India's second-largest share sale this year. 

The IPO received bids for more than three times the shares on offer at the end of the last day of bids. The portion reserved for institutional investors was subscribed six times, while the shares earmarked for retail investors were 114% subscribed. 

However, analysts expect the loss-making company to make a muted debut on stock exchanges next week, weighed down by broader market weakness and concerns that profitability may be some time away. 

 

India's benchmark Nifty 50 index has cooled 8% from the record highs it hit in late September, as foreign investors shifted money to China after Beijing's stimulus announcements and lacklustre Indian corporate earnings. 

"Institutional over-subscription on the third day ... has happened as these investors generally subscribe keeping a long-term view - which looks strong for Swiggy given the duopolistic market in the booming food delivery and "quick commerce" sector in India," said Prashanth Tapse, senior vice president of research at Mehta Equities. 

"But listing gains are not expected, especially considering the subdued sentiment in the secondary markets." While Swiggy has narrowed its annual losses, it is yet to turn a profit, while its rival Zomato has already posted a fiscal 2024 profit after a loss the previous year. 

Earlier this week, "anchor" institutional investors including Fidelity and Norway's sovereign wealth fund Norges had bought shares worth $605 million in the IPO. 

Swiggy's share issue comes on the heels of Hyundai Motor India's record IPO, which received a dismal response from retail investors put off by the price. The carmaker's stock is down 6% since listing. 

While big ticket offerings have seen relatively muted responses, India's IPO market has been buoyant, with about 290 companies raising nearly $14 billion so far this year, roughly twice the amount raised in all of last year, LSEG data showed.

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Swiggy has a 34% market share in food delivery compared to Zomato's 58%, while in "quick commerce" - where items from milk to electronics are delivered in 10 minutes - Zomato's Blinkit has an estimated 40-45% and Swiggy's Instamart has 20-25%, according to brokerage estimates. 

Swiggy has said it is opening bigger warehouses and reducing delivery times as it bets that its quick commerce business will overtake its main food delivery operations. It plans to use $140 million of its IPO proceeds to expand its warehouses. 

India's quick-commerce sector has boomed in recent years, with domestic sales expected to hit $6 billion this year, up from $100 million in 2020, according to research firm Datum Intelligence.