Swiggy’s delivery team comes together after attempting to claim the Guinness World Record title for the largest Vada Pav (Indian Burger) delivery across Mumbai. Swiggy team delivered eleven thousand (11,000) Vada Pav (Indian Burgers) across the city setting a Guinness World Record.
soba pictures | Rocket Lite | Getty Images
Shares of Indian food delivery giant Swiggy rose 15% in their first trade on Wednesday after a stellar initial public offering — the second-largest in the country this year.
The company, backed by SoftBank, raised 113.27 billion Indian rupees ($1.34 billion) in its initial public offering that closed on Monday, pricing its shares at 390 rupees per share. The IPO was reportedly oversubscribed more than three times, according to Indian business outlet Mint.
The listing comes close on the heels of Hyundai Motor India’s $3.3 billion IPO in October, the largest listing in India.
Swiggy shares allocated to qualified institutional buyers were subscribed more than six times, according to Mint, while the portion awarded to retail investors was 114% subscribed.
The IPO included an offer to sell existing shares worth 68.28 billion rupees, in addition to a new issue of shares worth 44.99 billion rupees.
The lead bookrunners for this IPO included Kotak Mahindra Capital, JPMorgan India and Citigroup Global Markets India.
Swiggy said the net proceeds of Rs 43.59 billion from the new issue of shares will be used to repay loans in its Scootsy subsidiary, as well as to further invest in the subsidiary.
Proceeds may also be used to fund inorganic growth through acquisitions, among other things.
Shares of Swiggy, which is listed on the Mumbai-based National Stock Exchange as well as the BSE, were up 15% at Rs 448.7.
Profitability concerns
In a note shortly before the stock began trading, Macquarie Equity Research said the company had a “potentially strong growth runway and improved margin,” but a “long and winding road to profitability.”
They noted that India’s ‘brisk commerce’ industry has witnessed rapid adoption over the past year or two.
The segment represents only about 1% of India’s grocery retail landscape, and there is an “accelerating latent growth runway” for Instamart, Swiggy’s delivery arm, the research firm added.
However, Macquarie raised concerns about Instamart’s profitability, saying there were headwinds to improving unit economics at the company.
Challenges include lower average order value if Instamart expands beyond India’s eight largest cities, as well as inflationary pressures from regulatory measures, such as a welfare scheme for gig workers that India is said to be working on.
Macquarie remains optimistic about Swiggy catching up with market leader Zomato in the food delivery segment. Although Swiggy is not as profitable as Zomato due to its smaller base and higher branding and employee costs, it can potentially fill this gap, she added.
Speaking to CNBC’s ‘Street Signs Asia’, Karan Taurani, senior vice president at capital markets firm Elara Capital, said Swiggy will face relatively less competition in the food delivery space as there is only one major competitor, Zomato.
However, Turani said the company would face “very high” competition in the express commerce segment, which has four big players in the market, with e-commerce giants such as Amazon also finding success.
