Swiggy, PayU hold I-banker pitches and gear up for mega 2024 IPOs

A second person told Moneycontrol that listed peer Zomato had improved a lot on the disclosures front (the firm's stock price has nearly doubled in the last six months) and that would have to be matched by Swiggy going ahead.

"These are early days and the quantum hasn't been finalized as yet but the issue size should be a minimum of a billion dollars. Keeping the market share and the overlapping business in mind, the valuation of Swiggy should be roughly in the same zone as that of Zomato, but more clarity will emerge based on additional financial metrics," he argued.

In its last announced fund raise, Swiggy mopped up $700 mn in January 2022 at a valuation of $10.7 bn. After two back-to-back markdowns, investor Invesco last valued Swiggy at around $5.5 bn while Baron Capital pegged it at around $7.3 bn. Alpha Wave Global, Qatar Investment Authority and Prosus are some of the other investors who have bet on Swiggy.

Currently, Zomato has a market cap of around Rs 88,000 crore. According to a note by Kotak Institutional Equities released in June 2023, for CY 22, Swiggy's market share in the food delivery space stood at 45 percent compared to rival Zomato's 55 percent.

Also Read: Why Zomato continues to eat into Swiggy’s market share

Importantly, Swiggy announced that its food-delivery business turned profitable in the March quarter of FY23, after factoring in all corporate costs, excluding employee stock option (ESOP) costs.

In a blogpost on May 18, Swiggy’s Co-founder and Chief Executive Officer (CEO) Sriharsha Majety said that the company’s quick commerce segment Instamart is on track to become contribution-margin break-even in the next few weeks. This is a metric typically used by e-commerce companies to communicate the profitability of their business on a per order basis, including variable costs like logistics, but excluding fixed costs and marketing spend.

Also Read: Swiggy’s food-delivery biz turns profitable in March, excluding ESOPs, says co-founder & CEO

"A confidential filing of the DRHP (draft red herring prospectus) is targeted for March 2024. If all goes well and market conditions are favourable, the IPO is likely to be launched in July-August," said a third person familiar with the listing plans of Swiggy.

SEBI introduced the concept of confidential filings in November 2022. Common in US markets, under this route, the issuer company is allowed to keep its offer document private by the pre-filing route until it firms up its IPO plan. The direct-to-home platform, Tata Play (formerly Tata Sky), is the first firm to file confidential papers with SEBI for an IPO.

The PayU Play

"PayU is planning an IPO of its Indian operations and met with i-bankers as well last week during a two-day pitch held in Dubai. The India unit has both payments and lending and the estimated IPO size should be around a billion dollars. Going ahead, the operations will need capital as a raw material," a fourth person told Moneycontrol.

PayU's listed peer Paytm has a market cap of Rs 57,355 crore and its stock price has risen by around 35 percent in the last six months.

Axis Capital, ICICI Securities, Kotak Mahindra Capital, SBI Caps, Jefferies, Citi, JP Morgan, Morgan Stanley, Bofa Securities are some of the i-banks which are likely to have participated in the IPO discussions with Swiggy and PayU, according to a fifth person.

The final IPO syndicate for both firms would be a combination of both domestic and foreign banks, he added.

All the five persons above spoke to Moneycontrol on the condition of anonymity.

Moneycontrol is awaiting responses to email queries sent to Swiggy and PayU. This article will be updated when we hear from both parties. The i-banks could not be reached for an immediate comment.

When contacted, a spokesperson from Prosus, said, “We don’t comment on rumours or speculation related to IPO activity.”

A Moneycontrol report dated August 2 said that that PayU was looking to list its Indian operations at a valuation of $6bn-$6.5 bn.

Also Read: PayU plans to list in India next year, looking at $6 billion valuation, say sources

PayU India reported $400 mn in revenue for the financial year that ended in March 2023, registering a growth of 31 percent, the company said in a statement.

PayU said that its India credit business grew 112 percent to reach a loan book of $256 million at the end of FY23. A large segment of the growth came from the growth in personal loans, which saw its revenue grow by three times to $83 million, a growth of 196 percent year-on-year, the company added.

PayU’s lending division LazyPay has around 4.4 million customers. The payment gateway firm reported a trading loss of $10 million owing to the shutting down of LazyPay's card vertical following regulatory hurdles.

PayU had sealed a deal with Billdesk to acquire the latter for $4.7 billion in August 2021. However, in a sudden twist, the company terminated the mega deal in October 2022.

Former Nykaa Chief Financial Officer Arvind Agarwal joins Prosus-owned PayU India as chief financial officer (CFO). Nykaa founder and chairperson Falguni Nayar had credited Agarwal for the "critical role" he played in the company’s emergence as a listed and profitable start-up.