Food delivery major Swiggy raises Rs 5,085 crore from anchor investors

Swiggy on Tuesday allotted shares worth Rs 5,085 crore to 151 anchor investors. The food delivery major allotted 130.4 million shares at Rs 390 apiece—the top end of its price band.

 

Among those who received an allotment in the anchor category were ICICI Prudential Mutual Fund, HDFC Life, SBI Life, and global mutual funds including Capital, Fidelity, Amundi, BlackRock, and Schroders.

 

Anchor allotments are made to marquee investors a day before the IPO to instil confidence and provide cues to other investors.

 

Swiggy’s IPO—which opens for all categories of investors on Wednesday and closes on Friday—comes at a time when the domestic markets have witnessed a sharp fall amid record selling from foreign investors. Additionally, the issue follows a disappointing listing by Hyundai Motor India (HMIL). The car-maker’s shares are currently languishing below the issue price after its Rs 27,870-crore IPO, India’s largest, received a tepid response from investors.

 

Swiggy’s IPO of Rs 11,327 crore will be India’s sixth largest in the domestic market and the second largest this year after Hyundai. The IPO comprises a Rs 4,499 crore fresh fund raise. Swiggy will use the fresh proceeds for the expansion of its dark store network, investment in technology and cloud infrastructure, brand marketing and business promotion, and funding inorganic growth.

 

Three-fourths of the issue is reserved for institutional investors as Swiggy doesn’t meet the profitability criteria. The retail quota for the IPO is only 10 per cent, as opposed to the typical 35 per cent.

 

The IPO also comprises a Rs 6,828 crore secondary share sale by 10 investors, which includes Tencent, Accel India, and Apoletto Asia. The acquisition cost for the selling shareholders ranges between Rs 11.2 and Rs 165.5 per share.

 

The price band for the issue is Rs 371-390 per share. At the top end, Swiggy will be valued at Rs 87,300 crore. Swiggy’s rival Zomato is currently valued at Rs 2.1 trillion.

 

Zomato had launched a Rs 9,375 crore IPO in July 2021, where new shares worth Rs 9,000 crore were issued at Rs 76 apiece. Shares of Zomato last closed at Rs 248, down 1.7 per cent from its previous close.

 

In FY24, Swiggy’s loss narrowed to Rs 2,350 crore from Rs 4,179 crore in FY23. Its revenues from operations stood at Rs 11,247 crore in FY24, up from Rs 8,265 crore in FY23.

 

At the upper end, Swiggy is valued at Price/Sales, EV/Sales, and P/BV multiples of 7.8x, 7.3x, and 7.1x, respectively, based on its FY24 financials on post-issue capital. When compared with Zomato, the issue appears to be fairly priced on all these parameters. “We recommend investors subscribe to the issue from a long-term investment perspective,” said SBI Securities in a note.