Swiggy IPO listing prediction: Analysts raise caution ahead of market debut

Following the completion of its initial public offering (IPO), Swiggy shares are slated to make their debut on the bourses on Friday, November 8, 2024

Swiggy IPO listing prediction: Market analysts recommend a cautious approach for investors ahead of the listing of shares of food and grocery delivery firm Swiggy, scheduled for Wednesday, November 13, 2024, following the completion of its initial public offering (IPO). 

 

As Swiggy's listing approaches, investors are closely watching grey market trends. Sources tracking grey market activity reveal that Swiggy's unlisted shares were trading at a premium of only Re 1 against the IPO allotment price of Rs 390, translating to a grey market premium (GMP) of 0.26 per cent. This suggests a muted listing for the company’s shares. Should the current GMP trend persist, Swiggy’s shares may list around Rs 391, a premium of merely Re 1 against the IPO allotment price.

 

 

Analysts suggest cautious approach 

While the IPO received decent subscription at 3.59 times, the current GMP indicates muted investor enthusiasm, according to Shivani Nyati, Head of Wealth at Swastika Investmart. "This subdued sentiment likely reflects concerns over the company's ongoing losses, despite steady revenue growth," she said. Nyati believes that while the IPO's valuation may appear reasonable on some metrics, it presents a challenge due to negative earnings. Furthermore, current volatile market conditions may impact listing performance.

 

Given these factors, analysts recommend a cautious approach. Investors with a high-risk tolerance and a long-term outlook may consider the IPO, but they should be mindful of the potential risks tied to Swiggy’s financial position and broader market conditions.

 

Despite being the second-largest e-commerce and food delivery player, Swiggy saw sluggish overall investor response, said Prashanth Tapse, Senior VP (Research) at Mehta Equities. He added, "While the overall subscription figures look solid on a consolidated basis, Day-3 QIB investors were primarily responsible for supporting Swiggy’s IPO, which echoes the trend seen with Hyundai Motors IPO."

 

Tapse believes that the majority of investors, especially NIIs and retail participants, stayed back due to reasons such as the negative cash flow business model, concerns over high competition, and the ongoing negative market sentiment. Given the low subscription demand from NIIs and retail investors, along with current market conditions, there is a high possibility of a flat to negative listing in the range of +/- 5-10 per cent of the issue price. 

 

For allotted investors, Tapse suggests not to expect any listing gains. Therefore, only risk-tolerant investors should consider holding the company for the long term, despite the short-term volatility and competitive pressures in the sector. For non-allottees, Tapse advises waiting for the price to settle and then revisiting the stock when better discounted opportunities arise.

 

Swiggy IPO details

Swiggy IPO is a book-built issue of Rs 11,327.43 crore, comprising a fresh issue of 115,358,974 shares and an offer for sale of 175,087,863 shares with a face value of Re 1 apiece, available at a price band of Rs 371-390. 

 

Swiggy's public offering received decent participation, oversubscribing by 3.59 times, driven mainly by Qualified Institutional Buyers (QIBs) who subscribed at 6.02 times, followed by retail investors at 1.14 times.

 

About Swiggy 

Founded in 2014, Swiggy is one of the leading players in India's burgeoning food delivery and e-commerce sector. It offers users an online platform, accessible via a single app, to search, select, order, and pay for food (Food Delivery), groceries, and household goods (Instamart), with deliveries fulfilled through an on-demand network of delivery partners.