Swiggy Ltd.'s initial public offering, the country's second largest this year, is receiving the same fanfare Hyundai got as India's largest ever: lukewarm. The book-building issue managed to drag its feet across the full subscription mark on the last day, with institutional buyers rushing in. Portions for rich individuals and retail investors are still not fully subscribed.
Institutional buyers are likely to save the day for the food delivery platform, with their portion already subscribed 73%. Notably, QIBs pour into IPOs on the eleventh hour to avoid locking in their funds.
One of the two players dominating the food delivery space in India—the other one being Zomato—Swiggy did not manage to enthuse market watchers either. Aditya Birla Money recommended avoiding the offer, whereas Motilal Oswal suggested it only to 'high-risk' investors looking for long-term.
Here are the reasons why the Swiggy IPO has not been able to attract investors' interest:
Low GMP, Meagre Listing Gains
Swiggy has seen its grey market premium shrink substantially over the past two weeks. From Rs 25 per share on Oct. 29, it has fallen down to Re 1. Against the upper price band of Rs 390, this means the stock will likely debut at Rs 391 only.
Although speculative, grey market premium is considered an indication of listing gains. With returns so meagre, retail investors are likely to stay away. This year has seen listing gains cross Rs 833 per share (Waaree Energies, which was listed on Oct. 28).
A Turbulent India, Rising Global Peers
Indian markets have been going through a rough patch—benchmark Nifty 50 has fallen 3.5% in the past one month, and is up only 0.26% this week.
Meanwhile, China and the US have been gaining, the former on hopes of further stimulus and the latter after a Donald Trump victory
With the domestic market on the downward trend and greener pastures elsewhere, investors are reluctant in putting more money into Indian stocks.
FPI Interest Dwindles
Foreign portfolio investors have been averse to India for some time now.
Foreign investors have been sellers of Indian equities for 29 sessions on a trot so far. In November so far, they have have sold equities worth Rs 16,445.49 crore after having sold Rs 1.14 lakh crore in October.
Unenthusiastic HNIs
Non-institutional investors have subscribed only 23% of the portion reserved for them so far. Of the 26,930 public shareholders of the company, more 20,000 are non-employees, as per NDTV Profit calculations, which include high-net worth individuals and retail investors.
Considering they already hold a substantial portion of the 212.3 crore shares, they might be hesitant in buying more.
After the anchor allocation, 14.96% of the offer has been reserved for HNIs, with 9.97% for large NIIs and 4.99% for small NIIs
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