Swiggy sets IPO price band at Rs 371-390 for its mega issue.

by | Nov 2, 2024 | 0 comments

Swiggy Ltd., the popular Indian food delivery giant, has officially announced a price band of Rs 371-390 per share for its highly anticipated initial public offering (IPO). The IPO will be open for public subscription from November 6 to November 8, marking a significant milestone in Swiggy’s journey to the public markets. The anchor book, a critical phase of the IPO process, is set to open on November 5, followed by the basis of allotment and refund initiations on November 11. Equity shares will be credited to investors’ accounts on November 12, with the stock listing scheduled for November 13.

IPO Structure and Total Issue Size

The IPO will consist of a fresh issue valued at Rs 4,499 crore and an offer-for-sale (OFS) of 17.5 crore shares by the company’s existing shareholders and promoters. At the higher end of the price band, the OFS component is valued at Rs 6,828 crore, making the total IPO size approximately Rs 11,327.43 crore. This places Swiggy’s estimated market capitalization (mcap) around Rs 87,299 crore upon listing, an impressive valuation for the platform, which has rapidly gained a stronghold in the Indian food delivery market.

Revised Fresh Issue and OFS Components

The company initially planned a fresh issue size of Rs 3,750 crore but has increased it to Rs 4,499 crore, while simultaneously reducing the OFS component, which was previously pegged at 18.5 crore shares. This restructuring reflects Swiggy’s focus on raising more capital directly from the market, likely to fuel its expansion and investment in various verticals within the business.

Prominent Selling Shareholders

Swiggy’s IPO involves several well-known investors who are opting for partial exits. The prominent stakeholders participating in the OFS include Accel India, Apoletto Asia, Alpha Wave Ventures, Coatue PE Asia, DST EuroAsia, Elevation Capital, Inspired Elite Investments, MIH India Food Holdings, Norwest Venture Partners, and Tencent Cloud Europe. MIH India Food Holdings, a Prosus affiliate, holds the largest stake in Swiggy at 30.93%, while SoftBank Group’s SVF II SONGBIRD (DE) LLC has a 7.75% stake. Additional investors include Accel India, with a 4.71% stake, and Tencent Cloud, which holds 3.64%.

Swiggy Founders and Shareholder Stakes

Swiggy’s co-founders remain key stakeholders in the company. Sriharsha Majety, Managing Director and Group CEO, holds a 5.36% stake, while Lakshmi Nandan Reddy Obul, Whole-time Director and Head of Innovation, owns a 1.75% stake. Their substantial equity holdings demonstrate a continued commitment to Swiggy’s growth and innovation efforts, especially as the company heads into a pivotal public offering.

Utilization of IPO Proceeds

The funds raised through the IPO are allocated strategically across Swiggy’s various business initiatives. The company has outlined its planned use of funds from the fresh issue as follows:

  • Investment in Subsidiary Scootsy: Swiggy will allocate Rs 1,343.5 crore to boost its premium delivery service, Scootsy, aiming to strengthen its offerings and market reach.
  • Technology and Cloud Infrastructure: A total of Rs 703.4 crore will be invested in upgrading Swiggy’s technology stack and cloud infrastructure, ensuring enhanced service reliability and scalability.
  • Brand Marketing and Business Promotion: Rs 1,115.3 crore is earmarked for marketing initiatives, aimed at solidifying Swiggy’s brand presence in the competitive food delivery market.
  • Inorganic Growth and General Corporate Purposes: The remaining funds will support acquisitions and other corporate initiatives that align with Swiggy’s long-term growth strategy.

Financial Overview and Recent Performance

Swiggy has been proactive in its efforts to reduce financial losses while driving revenue growth. For the fiscal year 2024, the company managed to significantly reduce its losses to Rs 2,350.2 crore, a considerable improvement from the Rs 4,179.3 crore loss reported in the previous year. Revenue from operations also saw a strong uptick, growing by 36% year-on-year to Rs 11,247.4 crore compared to Rs 8,264.6 crore in FY23. These results reflect Swiggy’s concerted efforts to optimize operations and drive efficiency across its business verticals.

The company’s performance in the quarter ended June 2024 provides additional insights into its financial trajectory. Swiggy reported a loss of Rs 611 crore for this period, slightly higher than the Rs 564 crore loss in the same quarter of the previous fiscal year. However, revenue surged by 35% to reach Rs 3,222.2 crore, highlighting Swiggy’s strong top-line growth amidst ongoing operational improvements.

Lead Managers for the Issue

The IPO is backed by a distinguished team of merchant bankers, ensuring a smooth process and maximizing investor interest. Kotak Mahindra Capital Company, Citigroup Global Markets India, Jefferies India, Avendus Capital, JP Morgan India, BofA Securities India, and ICICI Securities are serving as the book-running lead managers. This robust lineup of financial advisors underscores the high expectations surrounding Swiggy’s public debut.

Conclusion: Swiggy’s Strategic Growth Path

Swiggy’s upcoming IPO reflects a transformative moment not only for the company but also for the Indian food delivery market. The revised allocation of the fresh issue to favor capital for operational investments, technology enhancement, and marketing initiatives demonstrates Swiggy’s long-term focus on scaling sustainably. The funds dedicated to Scootsy and technology infrastructure position Swiggy to improve its premium offerings and enhance user experience, key factors for retaining and expanding its customer base.

As Swiggy prepares for its stock market entry, the IPO will be closely watched by investors, given the company’s role in reshaping India’s digital food and grocery delivery landscape. With an impressive growth track and strategic investments, Swiggy aims to reinforce its position in a market where demand for convenience-driven services continues to expand. For potential investors, Swiggy’s IPO offers a unique opportunity to participate in the growth of one of India’s leading digital platforms, poised for further success and innovation in the years to come.

Swiggy’s successful market debut could set a precedent for other startups in the Indian tech ecosystem, adding momentum to the burgeoning food delivery industry’s growth narrative. The strategic use of IPO proceeds, streamlined operations, and robust backing from prominent investors provide a promising foundation for Swiggy’s journey as a publicly traded entity.

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