Swiggy IPO: QIBs do final-day heavylifting, isssue subscribed 3.6x

Institutional investors swoop in on Day 3 to corner 90% bids

The Rs 11,327-crore initial public offer (IPO) of food delivery and quick-commerce major Swiggy was fully subscribed on the final day of the share sale on Friday, and ended with 3.6 times subscription.

 

Over 90 per cent of the bids came from qualified institutional buyers (QIBs), with their portion being booked 6 times. The high net-worth individual (HNI) portion was subscribed 41 per cent, while retail and employee quotas saw subscriptions of 1.14 times and 1.65 times, respectively.

 

 “The response from retail investors should be viewed in the context of the volatility over the past four to five weeks. The market doesn’t seem to have enough catalysts to move upwards. The issue size was large, but the overall institutional demand was strong. It’s also a 75 per cent QIB book issue; if it were a 50 per cent QIB book, the subscription numbers would have looked better,” said V Jayasankar, managing director at Kotak Investment Banking. 

 

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

 

Ahead of the IPO, Swiggy allotted shares worth Rs 5,085 crore to 151 anchor investors at Rs 390 per share, the top end of its price band. Allotments in the anchor category included ICICI Prudential Mutual Fund, HDFC Life, SBI Life, and global mutual funds such as Capital, Fidelity, Amundi, BlackRock, and Schroders.

 

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

 

Swiggy’s IPO, India’s second-largest this year, was launched amid market turbulence triggered by over $10 billion worth of selling by foreign portfolio investors. Additionally, disappointing corporate results from large companies have made investors cautious.

 

It comprised a Rs 4,499-crore fresh fundraise.

 

The Tencent-backed firm will use the fresh proceeds for expanding its dark store network, investing in technology and cloud infrastructure, brand marketing, business promotion, and funding inorganic growth.

 

The Bengaluru-based company’s IPO has a price range of Rs 371-390 apiece.

 

At the top end, Swiggy will be valued at Rs 87,300 crore. In comparison, Swiggy’s rival Zomato is currently valued at Rs 2.2 trillion.

 

Zomato had launched a Rs 9,375-crore IPO in July 2021, issuing shares worth Rs 9,000 crore at Rs 76 per share.

 

In FY24, Swiggy’s losses narrowed to Rs 2,350 crore from Rs 4,179 crore in FY23. Its revenue 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-to-sales, EV/sales, and price-to-book value (P/BV) multiples of 7.8x, 7.3x, and 7.1x respectively, based on its FY24 financials on a post-issue capital basis. 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.