Leading food delivery company Swiggy’s shares were launched on the NSE at a 7.69% premium over their IPO price of Rs 390. The company’s NSE listing price was Rs 420. At Rs 412 on the BSE, it made its debut at a premium of 5.64%.
Just over three subscriptions were received by the company when it launched its initial public offering (IPO) last week. Despite consistent revenue growth, analysts suggested the company’s ongoing losses are probably the reason for this muted sentiment.
“The IPO’s valuation, while appearing reasonable based on certain metrics, presents a challenge due to negative earnings. Additionally, the current volatile market conditions may further impact the listing performance,” said Shivani Nyati, Head of Wealth at Swastika Investmart.
The food delivery company plans to invest the IPO revenues in cloud infrastructure and technology, as well as in its material subsidiary Scootsy, as well as in brand marketing and business development. Over the course of four to five years, this will be accomplished.
In India’s online restaurant and food delivery market, Swiggy and Zomato are competitors. Both companies have placed significant bets on the growth of “quick-commerce,” which involves the delivery of groceries and other goods in ten minutes.
Post listing, Prashanth Tapse of Mehta Equities said only risky investors should consider the company to “Hold For Long Term despite knowing short term volatility and competitive pressures in the sector. For non-allottees, we advise them to wait and watch for the price to settle and revisit the space with better discounted opportunities,” he said.
Nyati also recommends a cautious approach in dealing with Swiggy as investors with a high-risk tolerance and a long-term perspective may consider looking at the company. “It is essential to acknowledge the potential risks associated with the company’s current financial position and the broader market uncertainties,” she adds.
Since its formation, the business has experienced net losses every year and has negative operating cash flows.
The loss for the fiscal year that concluded in March 2024 was Rs 2,350 crore, as opposed to Rs 4,179 crore for FY23 and Rs 3,628 crore for FY22. However, operating revenue at that time doubled from Rs 5,704 crore in FY22 to Rs 11,247 crore in FY24.
