Swiggy's initial public offering (IPO) of $1.4 billion was substantially oversubscribed on Friday, as institutional investors placed a significant number of orders on the final day of India's second-largest share sale this year.
By 2:45 p.m. IST, bids had been received for approximately three times the quantity of shares available. The institutional investor segment was subscribed at 485%, while the retail investor portion experienced a subscription rate of 105%.
Notwithstanding the robust demand, analysts anticipate a potentially underwhelming debut for the loss-making entity on the stock exchanges next week. This projection is influenced by broader market trends and apprehensions concerning the timeline for attaining profitability.
India's benchmark Nifty 50 index has experienced an 8% decline from its peak in late September. This downturn can be attributed to foreign investors redirecting their funds to China in response to stimulus announcements and the disappointing corporate earnings reported in India.
Prashanth Tapse, Senior Vice President of Research at Mehta Equities, observed that the substantial institutional oversubscription on the third day suggests that these investors generally adopt a long-term perspective. This bodes well for Swiggy, considering the competitive landscape in India's growing food delivery and "quick commerce" sectors. Nevertheless, he cautioned that listing gains are improbable due to the prevailing subdued sentiment in secondary markets.
While Swiggy has managed to reduce its annual losses, it has yet to achieve profitability, in contrast to its competitor Zomato, which reported a profit for fiscal 2024 after incurring losses the previous year.
Earlier this week, prominent institutional investors, including Fidelity and Norway's sovereign wealth fund Norges, purchased shares worth $605 million in the IPO.
Swiggy's share offering follows Hyundai Motor India's record IPO, which faced a tepid response from retail investors deterred by its pricing. Since its listing, the carmaker's stock has fallen by 6%.
India's IPO market has demonstrated remarkable activity this year, with approximately 290 companies collectively raising close to $14 billion, which is nearly double the total amount raised throughout the previous year, according to data from LSEG. In contrast, larger offerings have experienced relatively subdued interest.
In the realm of rapid commerce, Swiggy holds a 34% share in the food delivery market, while Zomato leads with 58%. In the rapid commerce segment, which delivers a range of products from groceries to electronics within 10 minutes, Zomato's Blinkit commands an estimated 40-45% market share, compared to Swiggy's Instamart at 20-25%, based on brokerage assessments.
Swiggy is investing in larger warehouses and aiming to decrease delivery times, anticipating that its quick commerce division will surpass its primary food delivery services. The company intends to allocate $140 million from its IPO proceeds for warehouse expansion.
The quick commerce sector in India has experienced significant growth in recent years, with domestic sales projected to reach $6 billion this year, a substantial increase from $100 million in 2020, as reported by research firm Datum Intelligence.