India’s Swiggy tries enticing IPO bargain hunters
The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Refiles to add topic codes.
By Shritama Bose
MUMBAI, Sept 30 (Reuters Breakingviews) -A food delivery company is about to test the appetite of India's roaring stock market. SoftBank Group 9984.T and Prosus-backed PRX.AS startup Swiggy may target a valuation of up to $15 billion in its Mumbai initial public offering, Reuters reported last week, citing an unnamed source. It's losing money and is also smaller than its profitable, faster-growing rival, Zomato ZOMT.NS, per the prospectus that was made public on Thursday. But the bet is that it's improving enough to catch up.
The $29 billion Zomato has a larger user base and higher sales. It grew revenue from operations at nearly twice the rate Swiggy did during the 12 months to the end of March, which was also its first full year of profit.
Swiggy does at least seem to be pricing its stock-market debut accordingly. Its target valuation implies a multiple of 10 times forward sales, based on annualising first-quarter revenue. That’s a discount to Zomato’s 14 times multiple, using the same calculation.
Even so, the price of Swiggy shares in the private market has jumped 40% in the past two months. That's because local sports stars and Bollywood celebrities have piled in ahead of the initial public offer, website ETOnline reported on Thursday.
The upstart's financials are improving, though. Its food delivery segment generated earnings on an adjusted EBITDA basis during the three months to June, compared with a loss in the same period last year. Contribution margins are improving, too, in its quick commerce business, where Zomato got ahead via M&A. Swiggy does a better job of retaining app users than its rival, per a Bernstein analysis, even though Zomato’s larger user base dulls that edge.
Top shareholder Prosus, which wrote off its stake in what was once India's most valued startup, Byju’s, in June, is only selling a chunk of its affiliate's 31% position in the float. SoftBank, meanwhile, is keeping hold of its shares, having watched Zomato stock more than double since it sold its holdings in December.
Recent blockbuster IPOs have performed well, too. E-bike maker Ola Electric OLAE.NS and retailer Brainbees BRAE.NS are both trading around a thirdabove their offer price, even after losing some steam of late.
That, combined with a lower multiple than Zomato, makes Swiggy's IPO a decent bet for bargain hunters. The big question is whether India's booming market can stomach another big deal, or will get indigestion.
Follow @ShritamaBose on X
CONTEXT NEWS
Food and grocery delivery startup Swiggy on Sept. 26 filed updated papers for a Mumbai initial public offering. The company plans to raise up to $1.25 billion at a valuation of $15 billion, Reuters reported the same day, citing an unnamed source.
The offer will comprise fresh shares worth up to 37.5 billion rupees ($448 million) and the sale of up to 185.3 million existing shares, per the draft prospectus. Prosus, Accel India, Yuri Milner-backed Apoletto Asia and a Tencent fund are among the sellers. Kotak Mahindra Capital, Citi, Jefferies, Avendus, JPMorgan, Bank of America and ICICI Securities are advising Swiggy on the deal.
Graphic: Swiggy trails its listed rival on financial metrics https://reut.rs/3ZGxIjt
Editing by Antony Currie and Aditya Srivastav
Aset Terkait
Berita Terbaru
Pengungkapan: Entitas XM Group menyediakan layanan khusus eksekusi dan akses ke Fasilitas Trading Online kami, yang memungkinkan Anda untuk melihat dan/atau menggunakan konten yang tersedia pada atau melalui situs, yang tidak untuk mengubah atau memperluas, serta tidak mengubah atau memperluas hal tersebut. Akses dan penggunaan ini selalu sesuai dengan: (i) Syarat dan Ketentuan; (ii) Peringatan Risiko; dan (iii) Pengungkapan Penuh. Oleh karena itu, konten disediakan hanya sebagai informasi umum. Anda juga harus ketahui bahwa konten Fasilitas Trading Online kami bukan sebagai ajakan atau tawaran untuk untuk melakukan transaksi apa pun di pasar finansial. Trading di pasar finansial mana pun melibatkan tingkat risiko yang signifikan pada modal Anda.
Semua materi yang diterbitkan di Fasilitas Trading Online kami hanya untuk tujuan edukasi/informasi dan tidak boleh mengandung nasihat dan rekomendasi finansial, pajak investasi atau trading, catatan harga trading kami, penawaran, permintaan, transaksi dalam instrumen finansial apa pun atau promo finansial untuk Anda yang tidak diminta.
Konten pihak ketiga apa pun, serta konten yang disiapkan oleh XM, seperti opini, berita, riset, analisis, harga, informasi lain atau link ke situs pihak ketiga yang tersedia "sebagaimana adanya", sebagai komentar pasar umum dan bukan menjadi nasihat investasi. Sejauh konten apa pun ditafsirkan sebagai penelitian investasi, Anda harus memperhatikan dan menerima bahwa konten tersebut tidak dimaksudkan dan belum disiapkan sesuai dengan persyaratan hukum yang dirancang untuk mempromosikan kemandirian riset investasi dan dengan demikian akan dianggap sebagai komunikasi pemasaran di bawah hukum dan peraturan yang relevan. Mohon dipastikan bahwa Anda telah membaca dan memahami Notifikasi pada Riset Investasi Non-Independen dan Peringatan Risiko kami mengenai informasi di atas, yang dapat diakses disini.
