Swiggy, the Indian food delivery giant, is making waves with its recent announcement to launch an Initial Public Offering (IPO) on November 6. This ambitious move, estimated to raise Rs 12,000 crore, includes a Rs 3,750 crore fresh issue and a sizeable offer for sale (OFS) by existing investors, positioning Swiggy as a formidable player on Dalal Street.

Aiming for the stars: Swiggy targets a record-breaking valuation

Swiggy’s IPO is set to break new ground in the Indian tech landscape with a valuation target between $10 billion and $12 billion. This puts it in close competition with Zomato, its primary rival in the food delivery sector. Analysts point out that Swiggy’s valuation strategy comes amid fierce competition, particularly as Zomato’s market capitalisation hit Rs 2.6 trillion this year. The IPO price band is expected to be between Rs 371 and Rs 390 per share, creating a potential blockbuster for both institutional and retail investors.

While Swiggy reported a substantial revenue of Rs 11,247 crore for FY2024, its net losses of Rs 2,256 crore reflect the challenges ahead. The company’s quick-commerce arm, Instamart, has contributed significantly to its growth, yet it also represents a major area of investment that has yet to turn profitable. Nevertheless, the company’s overall valuation aligns with investors’ optimism about the future of quick-commerce, a sector projected to grow by 60-80% annually.

Big backers and a hefty offer for sale

Swiggy’s major backers, including Prosus, SoftBank, and Accel, have decided to divest part of their stakes through the IPO. The offer for sale is expected to be around Rs 6,950 crore, a strategic move that analysts say could strengthen the firm’s capital base while also testing market appetite for tech-focused IPOs. Swiggy’s public offering also marks a historic moment as the first IPO under SEBI’s confidential filing route, allowing sensitive financial data to remain private until closer to the listing date.

Expert insights: a ‘discounted’ IPO for investor appeal

Market experts indicate that Swiggy’s IPO valuation could carry a discount compared to Zomato due to its relatively lower profitability. Analysts suggest Swiggy might see a valuation of 25-30% less than Zomato’s, considering factors like Zomato’s higher scale and growth rate. Additionally, Zomato’s success with quick-commerce and consistent performance metrics set a high benchmark for Swiggy, which remains in an expansion mode with Instamart. One analyst noted that the “discount” might be necessary to attract investors, as Swiggy is yet to establish a strong track record in the listed market space.

Industry observers will closely monitor Swiggy’s quarterly performance and execution strategy in food delivery and quick commerce post-IPO. Swiggy’s aggressive expansion in the quick-commerce segment, which also includes major competitors like Zepto and Tata’s BigBasket, is expected to intensify following its listing.

The road ahead: A milestone for Indian tech ipo landscape

Swiggy’s IPO is expected to be a milestone for the Indian tech IPO landscape, showcasing the potential of the confidential filing route. By leveraging this path, Swiggy ensures that it can limit public scrutiny and avoid any last-minute litigations, which is essential for high-stakes tech offerings. Experts believe that if Swiggy’s IPO performs well, it could pave the way for other Indian startups considering public listings, particularly in tech sectors with heavy investor interest.

For Swiggy, the stakes are high as it moves closer to competing head-to-head with Zomato in the public market. This high-stakes IPO will not only determine Swiggy’s valuation trajectory but will also test investor confidence in India’s growing digital ecosystem.

  Accel, Instamart, Prosus, Securities and Exchange Board of India, SoftBank, Swiggy, Tata BigBasket, Zomato