Swiggy IPO: Buy For The Long Term, Say Brokerages

Swiggy’s initial public offering (IPO) is set to open on November 6 and the big question among retail market investors is around the potential upside from subscribing to the issue. 

Brokerage firms Bajaj Broking and SBI Securities have advised investors to subscribe to the offer, but only with a long term investment perspective. 

In its IPO note, Bajaj Broking observed that Swiggy has reported financial losses over the past three fiscal years. 

Swiggy reported a loss of INR 2,350 Cr in the fiscal year 2023-24 (FY24), 44% lower than INR 4,179.3 Cr in the previous fiscal year. For the first quarter of the ongoing fiscal (Q1 FY25), its consolidated net loss widened by over 8% to INR 611 Cr from INR 564.08 Cr loss it recorded in Q1 FY24. 

Further, the brokerage also observed that Swiggy’s IPO price to book value (P/BV) is set at an 11.60 based on its net asset value (NAV) of INR 33.61 as of June 30, 2024, and is at a P/BV of 7.31 based on its post-IPO NAV of INR 53.36 per share. 

“If we attribute annualised FY25 earnings to post-IPO fully diluted equity base, then the asking price is at a negative P/E, and based on FY24 earnings also it is at a negative P/E, as the company has posted losses for the reported periods. On other parameters the issue appears aggressively priced,” the brokerage said in its note.

Meanwhile, SBI Securities also advised investors to subscribe to the issue from a long term investment perspective. However, it differs with Bajaj Brokerage on the pricing of Swiggy’s IPO.

“While comparing with Zomato, the issue appears to be fairly priced on all these parameters. We recommend investors to subscribe to the issue for a long term investment perspective,” the brokerage said in its IPO note.

The Swiggy IPO comprises a fresh issue of INR 4,499 Cr and an offer for sale (OFS) component of 17.5 Cr equity shares. The price band of the offer is set in the range of INR 371 per equity share to INR 390 per equity share. Further, investors can bid for a minimum of 38 equity shares and in multiples of 38 equity shares thereafter.

Swiggy is expected to announce the finalisation of basis of allotment on November 11 and the shares will be credited to the demat accounts of successful bidders by November 12. Its shares will list on the BSE and the NSE on November 13.

As expected, 75% of the issue is reserved for qualified institutional buyers (QIBs) while 15% and 10% are set aside for Non Institutional Bidders (NIBs) and Retail Individual Buyers (RIBs) respectively.