Swiggy IPO is likely to list on November 13, but the company’s grey market premium has been on a downward spiral and is now barely a rupee higher than the issue price. On October 29, Swiggy was commanding a premium of Rs 25, or 6.4%, to the issue price.

The drop in GMP can be attributed to a lower interest and subscription from the investors. This can be understood from the fact that on day 01, Swiggy’s IPO was subscribed 12%. In this, the retail participants booked the issue 56% and NIIs a mere 6%. While on the second day of the subscription, the IPO was booked to a total of 35%. On day 02, the NII segment was booked 14% and retail 84%. Overall the issue has been subscribed 3.59 times with the retail portion being subscribed 1.14 times.

The issue was primarily driven by the QIBs, who subscribed to the issue a bit more than 6 times, a similar case to that of the Hyundai IPO.

Negative cash flow a worry?

One of the concerns about the declining GMP can be attributed to the net loss incurred by the company thus far and the negative cash flow from operations. 

“While Swiggy’s decision to lower its valuation leaves some upside room for the investors, we still recommend an “Avoid” to this issue due to the “reported negative” cash flows and ongoing losses, alongside a slightly high valuation of 7.7x FY24 price-to-sales,” said Aditya Birla Money in an IPO note. 

The issue is priced at a price-to-book value of 11.60 based on its NAV of Rs 33.61 as of June 30, 2024, and is at a P/BV of 7.31 based on its post-IPO NAV of Rs 53.36 per share (at upper cap)

Swiggy IPO: Top 3 risks 

  1. Customer retention a key factor: If Swiggy fails to retain its existing user base or fails to acquire new users in a cost-effective manner, the company’s business, financial condition, and results of operations could be adversely affected.
  2. Highly competitive industry: Swiggy operates in a highly competitive hyperlocal industry. The increase in household income and purchasing power of Indians along with rapid digitisation has led to the proliferation of the hyperlocal commerce ecosystem in India with multiple players entering this market.
  3.  Delivery partners are on contract basis: The company does not have exclusive arrangements with delivery partners, merchant partners, brand partners, and almost all our restaurant partners. This may lead all of them to prioritize the services of the company’s competitors.
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Swiggy IPO details

Swiggy’s Rs 11,327 crore initial offering (IPO) concluded on Friday. According to NSE’s latest data, the IPO received a total bid of 57,53,07,536 shares against 16,01,09,703 shares on offer. The IPO was opened on November 06. The IPO price band ranged between Rs 371 to Rs 390 per equity share.