Swiggy, the Indian food delivery startup, saw its stock price surge by 17% on its debut at the National Stock Exchange (NSE) in Mumbai. Investors placed their bets on the booming quick commerce sector in India. Sriharsha Majety, Managing Director and Group Chief Executive Officer of Swiggy, and Ashishkumar Chauhan, Managing Director and CEO of the National Stock Exchange of India, rang the bell during the listing ceremony of Swiggy’s Initial Public Offering (IPO).
The company is now valued at $12 billion and saw strong interest from large investors. The IPO raised $1.4 billion. Swiggy’s impressive debut happened despite a broader market sell-off.
This shows investor confidence in the quick-commerce and food delivery sectors, which have grown significantly in recent years. Prosus, an early investor in Swiggy, reported making $2 billion from its investment in the company. However, there are concerns about profitability and increasing competition within the quick-commerce landscape.
Swiggy will need to navigate these challenges to keep growing. The $1.3 billion sale was India’s second-largest listing this year after Hyundai Motor India Ltd.’s record $3.3 billion IPO. It comes as global funds are selling local shares due to concerns over earnings growth.
Initial demand for Swiggy’s IPO was low, but institutional demand eventually drove it to a strong close. Swiggy’s IPO was seen as a test of investor interest in India’s growing quick-commerce sector. The debut puts the company against larger listed rival Zomato and privately-held Zepto in India’s rapid delivery space.
CLSA says these firms are set to have combined gross orders of over $78 billion within a decade. The listing goes against the recent trend of weak performance among large first-time offerings in India. IPOs raising over $1 billion since 2019 have fallen by an average 3% on their first trading day.
This compares with an average 19% gain for all listings in the country for the period. More big listings are coming up: state-backed NTPC Green Energy Ltd. is set to take bids for its up to $1.2 billion IPO next week.
Swiggy sees strong market debut
The Indian unit of LG Electronics Inc. and HDB Financial Services Ltd.
are also preparing for their debuts. While Swiggy’s IPO attracted global funds including Fidelity International, the loss-making company faces challenges. Competition among quick commerce firms has caught the attention of India’s antitrust watchdog, which is investigating the company and Zomato for alleged unfair practices.
Both firms have said no final order has been issued. Fierce competition means increased spending on small-sized warehouses. Macquarie Group analysts said “regulatory actions, such as welfare schemes for gig workers, will be inflationary.” They started coverage with an underperform rating and a target of 325 rupees.
Despite these hurdles, Swiggy’s growth is backed by strong online demand in one of the fastest-growing major economies. Its market share was about 37%, just behind Zomato’s 39% as of March 31, according to Chryseum Advisors. SoftBank Group Corp.
and Prosus NV have more than doubled the value of their investments at Swiggy’s listing price. Prosus and its controlling shareholder Naspers Ltd. invested $1.3 billion for a 31% stake in Swiggy before its debut.
Swiggy’s IPO is expected to create significant wealth for its employees. Around 500 are projected to become crorepatis through this offering. A total of 5,000 employees are set to collectively earn Rs 9,000 crore from the public offering.
The exact timeline for when Swiggy employees can sell their shares is still to be determined. However, the anticipation around this event suggests a transformative period for the company’s workforce. This development follows similar large-scale financial events in the tech industry, such as Flipkart’s payout of $1.4-1.5 billion to its employees.
It highlights a trend of lucrative IPOs within the sector.
