Swiggy’s $1.4 Billion IPO Fully Sold, Institutional Portion Overwhelmingly Demanded

Food and grocery delivery giant Swiggy’s initial public offering (IPO) worth $1.4 billion has been fully subscribed as of Friday, marking a significant milestone in India’s second-largest share sale of the year. Institutional investors showed strong demand, with the portion allocated to them being oversubscribed by 131%. Meanwhile, the retail investor portion was 97% subscribed.

Market Position and IPO Context

Swiggy holds a strong position as the No. 2 player in India’s food and grocery delivery market, trailing behind Zomato. The company has a 34% share in food delivery, while Zomato dominates with 58%. In the quick commerce segment, Swiggy’s Instamart holds 20-25% of the market, while Zomato’s Blinkit commands 40-45%, according to industry estimates.

Institutional Demand Reflects Long-Term Confidence

Despite Swiggy’s ongoing losses, analysts note that the IPO’s institutional subscription indicates strong long-term confidence in the company, particularly in India’s rapidly growing food delivery and quick-commerce market, which is dominated by Swiggy and Zomato.

Prashanth Tapse, senior vice president of research at Mehta Equities, remarked, “Institutional over-subscription on the third day … has happened as these investors generally subscribe keeping a long-term view – which looks strong for Swiggy given the duopolistic market in the booming food delivery and quick-commerce sector in India.”

However, Tapse cautioned that investors should not expect significant listing gains, given the current subdued market sentiment.

Despite strong demand from institutional investors, analysts expect Swiggy’s stock to have a muted debut when it lists on the exchanges next week. The company’s ongoing losses and broader market weakness are expected to keep its stock price under pressure. Swiggy posted a net loss of 23.5 billion rupees for the fiscal year ending March 2024, although this was a 44% improvement from the previous year.

While Zomato has managed to turn a profit in fiscal 2024 after a loss in the previous year, Swiggy’s profitability remains elusive, which could temper investor expectations for the IPO’s initial performance.