Swiggy IPO - 'Subscribe For Long-Term', Says Anand Rathi, Here's Why

Anand Rathi Report

Swiggy Ltd. launched its initial public offering today and the offer closes for subscription on Nov. 08. One of India’s leading food delivery and hyperlocal logistics company has fixed the price band in the range of Rs 371-390 per share. The minimum order lot for bidding in 38 shares.

The Rs 11,327.40 crore IPO comprises of fresh issue of Rs 4,499 crore alongside an offer for sale of 17.51 crore shares of about Rs 6,828.43 crore

Object of the issue

• Investment in Material Subsidiary, Scootsy,

• Investment in Scootsy for expansion of Dark Store,

• Investment in technology and cloud infrastructure, Brand Marketing,

• General Corporate Purpose.

Valuation & outlook

Swiggy, is one of the leading company in India's food delivery and hyper local logistics sectors, which quickly gained recognition as a household name. Over the years, Swiggy has transformed into a comprehensive technology-driven multi-service platform, providing food, groceries, and other essentials to millions of consumers across India.

Around 45% of IPO proceeds is embarked for investments directly related to quick commerce business with company planning to expand dark stores count in existing as well as into new cities With low cash burn, it is well positioned and funded to fight out with existing as well as any new entrants into this attractive space.

Like its rival in its initial day’s food delivery operator is yet to turn profitable, but shows steady revenues and is scaling up its quick commerce vertical amid intense competition.

On Valuation parse, at the upper price band the company’s implied market cap is around Rs 872986 million value at price-to-sales of 7.8 times of its FY24 financials on post issue which appears to be fairly priced.

Swiggy is well positioned to tap huge opportunities in quick commerce. Therefore we believe that as it is fairly priced the issue may be considered for its long term growth as scales up its revenue and gradually improve its bottom line. Hence we give “Subscribe for Long Term” rating to this IPO.

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