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Swiggy IPO: Can it Mirror Zomato's Growth Trajectory? Check Out What the Analysts Say

Swiggy IPO is all set to make its D-street debut next week on November 13. Here is what analysts are saying about whether you should subscribe

Swiggy IPO Subscription Status: One of the most highly-anticipated IPO of 2024 is finally here. The shares of the food delivery platform will be open for subscription from November 6 to November 8.

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While profits are still a far-off sight for the Zomato rival, Swiggy was able to achieve positive adjusted Ebitda in Q1FY25, which stood at Rs 57.8 crore.

The company witnessed a jump in its average monthly transacting users, reaching 1.4 crore as of June this year from 1.27 crore recorded in FY24. Swiggy also experienced a steady boost in its average order value. On top of that, the company's take rates are already outpacing that of Zomato’s.

However, investor sentiment appears to be subdued. At 12:25 am, the Swiggy shares were trading at a GMP (Grey market premium) of Rs 12, commanding a premium of just over 3 per cent. So far, the IPO has received 7 per cent overall subscription. The retail quota was subscribed over 30 per cent.

The company is raising Rs 11,327 crore through the public offering, which includes a fresh issue of shares worth Rs 4,499 crore and an OFS (offer for sale) of Rs 6,828 crore.

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Should you Subscribe? Here is What the brokerage say-

Motilal Oswal- Subscribe for long term

"Swiggy’s take rates are ahead of Zomato’s, indicating better monetisation of its platform. Swiggy’s approach of an integrated app offering vs. Zomato’s multi-app approach also helps it innovate faster. Although, the average MTU (monthly transacting users) is still higher for Zomato, GOV (gross order value) per user is higher for Swiggy. This shows Swiggy’s customer cohorts are more mature and stickier compared to its peer," the brokerage firm said.

However, considering that the food-delivery platform is still loss-making, the IPO might only be a good option for investors with high-risk profiles.

At an aggregate level, the company is still incurring losses and overall profitability might be some time away, we recommend only High Risk investors to ‘Subscribe for long term,' Motilal Oswal stated in its report. "At the upper price band of Rs 390, the issue is priced at 7.8x FY24 market cap to Sales and looks reasonably priced compared to Zomato which is trading at 17.5x."

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Bajaj Broking- Subscribe for long term

Over the last three financial years, the company has been losing money, as shown by its average EPS (Earnings Per Share) of -14.90 and RoNW (Return on net worth) of -35.39 per cent. These numbers indicate that the company hasn’t been profitable.

While Food Delivery and Quick Commerce are large and rapidly growing markets in India, they are still relatively young and have significant growth potential, as per Bajaj Broking. However, the company's valuation seems a bit expensive.

"If we attribute annualised FY25 earnings to post-IPO fully diluted equity base, then the asking price is at a negative PE, and based on FY24 earnings also it is at a negative PE, as the company has posted losses for the reported periods. On other parameters the issue appears aggressively priced," the brokerage firm added.

Swastika Investmart - A big 'May' for Subscription

No doubt, Swiggy has shown consistent revenue growth but the company is still loss-making. Its negative PE ratio raises concerns for conservative investors. The valuation might only seem reasonable when evaluated against metrics such as price-to-sales.

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"Given the current market conditions, both the subscription and listing performance could face pressure. Investors should consider Swiggy’s long-term growth potential alongside its current profitability challenges, making this IPO more aligned with those comfortable with high-risk exposure and a longer investment horizon," Shivani Nyati, Head of Wealth at Swastika Investmart Ltd.

Anand Rathi- Subscribe for long term

Nearly 45 per cent of the IPO proceeds will be allocated to investments in the quick commerce segment. The company is also planning to increase its dark store network in both existing and new cities. Like its rival in its initial days, Swiggy is yet to see profits in its balance sheet but is rapidly expanding its quick commerce vertical as competition remains high.

"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. 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," the brokerage firm said.

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