Swiggy, the Indian food delivery giant backed by SoftBank, saw its shares skyrocket by over 15% on Wednesday, marking an impressive stock market debut following its successful $1.34 billion initial public offering (IPO), CNBC reports.
The IPO, which closed on Monday, stands as the second-largest listing in India this year, surpassed only by Hyundai Motor India’s $3.3 billion listing in October.
Swiggy shares, initially priced at 390 rupees each, opened with strong investor demand on the National Stock Exchange and BSE, reaching as high as 465.8 rupees before settling at 456 rupees, or $5.41, giving the company a valuation near $12.1 billion. The IPO was oversubscribed more than three times, with high interest from institutional investors, whose allocation was subscribed over six times. Retail investors also showed enthusiasm, subscribing to their portion by 114%.
Despite ongoing profitability challenges, investors are showing confidence in Swiggy’s potential in India’s rapidly growing “quick commerce” sector. The IPO featured an offer for the sale of existing shares valued at 68.28 billion rupees and a fresh issue worth 44.99 billion rupees. Swiggy plans to use the net proceeds of 43.59 billion rupees to reduce debt in its subsidiary Scootsy and to fund future growth, including potential acquisitions.
Macquarie Equity Research, while acknowledging Swiggy’s significant growth potential, cautioned that profitability remains a complex hurdle. In particular, Macquarie raised concerns about Swiggy’s grocery delivery arm, Instamart, which operates in a competitive space with major players like Amazon entering the market. Although the quick commerce sector is still in its infancy, making up just 1% of India’s grocery retail landscape, Macquarie analysts see an “exponential latent growth runway” for Swiggy’s services.
Swiggy’s primary competitor, Zomato, has a larger market share in food delivery, but analysts are optimistic that Swiggy can close the gap. The company faces a relatively limited competitive landscape in food delivery but must contend with fierce rivals in quick commerce, where e-commerce giants and regional players are investing heavily.
Karan Turani, Senior Vice President at Elara Capital, stated on CNBC’s Street Signs Asia that Swiggy’s long-term challenge lies in navigating the intense competition in quick commerce. According to Turani, Swiggy’s leadership will need to balance expansion costs with pricing to maintain a competitive edge.
Swiggy’s robust first-day performance contrasted with a wider selloff in Indian markets, underscoring investor confidence in e-commerce and online delivery as consumers increasingly opt for quick, app-based services. Swiggy and Zomato are both capitalizing on this shift, offering 10-minute grocery deliveries that have intensified competition with traditional supermarkets and prompted new ventures from retail magnates like Mukesh Ambani.
