Swiggy IPO: Investors are considering their alternatives as Swiggy’s initial public offering (IPO) opens for public subscription on Wednesday, November 6: should they purchase Zomato stock or subscribe to the issue?
The topic is brought up by Zomato’s impressive performance this year, which is seen in the robust increase in its stock price. Zomato has produced an incredible 95% return on a year-to-date (YTD) basis, despite its share price plummeting 9% in a single month.
Blinkit, Zomato’s speedy commerce company, has also gained attention as a result of its rapid expansion. The majority of brokerage firms have cited this rise as the rationale for their optimistic assessment of Zomato’s stock. However, Swiggy is now lagging behind its competitor in terms of both market share and operational effectiveness.
Swiggy Ipo Or Zomato Stock?
Wealth Wisdom India Pvt Ltd’s founder and managing director, Krishna Patwari, has provided insightful commentary on the competitive environment between the two massive meal delivery companies.
He emphasized that Zomato’s better operational efficiency is demonstrated by the fact that Swiggy lags behind it by 4 to 6 quarters in both Food Delivery and Quick Commerce. He stated that Swiggy’s Gross Order Value (GOV) for FY25 is anticipated to be $3.3 billion, which is roughly 25% less than Zomato’s.
Despite having similar order frequencies, Patwari noted that Swiggy had 14 million monthly transacting customers compared to Zomato’s 20 million. He did point out, though, that Swiggy’s average order value is somewhat higher, indicating the possibility of larger transaction revenue.
But he cautioned that Swiggy’s journey to profitability is the true obstacle. “There are still concerns regarding Swiggy’s route to profitability, even though its initial public offering (IPO) may open up new growth prospects, particularly through its expanded basket size and expanded dark store footprint,” he continued.
The IPO’s appealing pricing may pique investors’ interest, but Patwari cautioned against it. “The company’s recent losses raise concerns about its long-term sustainability, even though the IPO’s valuation seems reasonable,” he stated.
As a result, Swiggy will have some difficulties in a market where Zomato has a greater presence. “How well Swiggy uses its resources to close the gap with Zomato will determine its competitive position after the IPO,” Patwari stated.
Therefore, he continued, “investors seeking listing gains should steer clear of the Swiggy IPO.”
In addition, Swiggy has some catching up to do when it comes to competing with Zomato, according to research analyst Gaurav Garg of Lemonn Markets Desk.
“While it shouldn’t be viewed as a valuation arbitrage, the nearly 50% valuation in comparison to Zomato provides some comfort,” Garg stated.
“We can see bridging in the value gap if Swiggy’s EBITDA increases to 3-4% in the food delivery industry, which is now at 1%, and Average Order Value (AOV) rises to Rs. 550-600 levels in rapid commerce with increasing non-grocery share. However, this shouldn’t be anticipated anytime soon,” he continued.
Subscriptions for Swiggy’s first public offering (IPO) will go live on November 6, 2024, and run through November 8. The price range is set at Rs 371-390, and the total issue size is Rs 11,327 crore. In a single lot, investors may bid for a minimum of 38 shares.
Before making their investment decisions, prospective investors should carefully weigh these insights and the competitive environment as the IPO date draws near.