Swiggy, the Indian food delivery giant, saw its shares surge by 17% in its stock market debut, reflecting investor confidence in the booming quick-commerce sector. The listing was marked by a ceremony at the National Stock Exchange (NSE) in Mumbai, attended by Swiggy’s Managing Director and CEO, Sriharsha Majety, and the NSE’s Managing Director and CEO, Ashishkumar Chauhan. With an initial public offering (IPO) valued at $1.4 billion, Swiggy’s market capitalization now stands at $12 billion.
The IPO saw robust participation from large investors, highlighting the strong market appetite for quick-commerce and food delivery services in India. Global consumer internet group, Prosus, reported a substantial $2 billion profit from its investment in Swiggy. The IPO’s success comes despite broader stock market volatility and concerns around profitability and competition in the quick-commerce space.
The $1.3 billion sale, India’s second-largest listing this year after Hyundai Motor India Ltd.’s $3.3 billion IPO, comes amid concerns over earnings growth leading global funds to dump local shares. Initial demand for Swiggy’s IPO was subdued, but increased institutional demand eventually drove it to a strong close. This IPO was seen as a test of investor appetite for the country’s quick-commerce sector, pitting Swiggy against larger listed rival Zomato and privately held Zepto.
According to CLSA, these firms are set to top $78 billion in combined gross orders within a decade. “These companies already have a good presence and people have gotten used to ordering,” said Pranav Bhavsar, a co-founder of Trudence Capital Advisors Pvt. “It is hard to do away with that once you get used to it.
That makes quick commerce a good theme to invest.”
The debut defies 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 of 3% on their first trading day, data compiled by Bloomberg show.
Swiggy’s IPO success highlights demand
This performance contrasts sharply with the average 19% gain for all listings in the country during that period. For instance, Hyundai Motor India’s shares dipped on debut last month and remain 12% below the IPO price. 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 Swiggy and Zomato for alleged unfair practices. Both firms have stated that no final order has been issued. Fierce competition means increased spending on small-sized warehouses, while “regulatory actions, such as welfare schemes for gig workers will be inflationary,” Macquarie Group analysts, including Aditya Suresh, wrote in a note.
They initiated coverage with an underperform rating and a target of 325 rupees. Despite these hurdles, Swiggy’s growth is bolstered by strong online demand in one of the fastest-growing major economies. Its market share stood at about 37%, just behind Zomato’s 39% as of March 31, according to Chryseum Advisors, which tracks unlisted shares.
Swiggy’s impending IPO is awaited with much anticipation and is expected to make waves both in the financial markets and in the lives of the company’s employees. The company’s IPO is projected to create around 500 new ‘crorepatis’ (millionaires) among its employees. Approximately 5,000 Swiggy employees stand to collectively earn a staggering Rs 9,000 crore from this offering.
This economic windfall promises to be a significant milestone for Swiggy, not just as a company but also for its employees, many of whom will see a transformation in their financial status. Employees will have the opportunity to sell their shares, marking a critical point in their professional journey with Swiggy.
