Swiggy's IPO price band is attractively valued, says banker

Swiggy IPO management

Swiggy's IPO price range of Rs 371 to Rs 390 is considered attractively valued, and was decided after comparing its ratios with the listed peer and adding qualitative factors to the same value, said an investment banker attending the IPO press conference.

Swiggy's competitor Zomato is currently trading at a trailing P/E of 297x, whereas the former's ratio stands at -35.23x. However, Swiggy's price range is positioned higher than Zomato's current trading price of Rs 247 at the close of the session on October 30.

Swiggy’s pre-IPO earnings per share (EPS) is calculated based on pre-issue shareholding, as stated in the Red Herring Prospectus (RHP), and the latest earnings for the fiscal year ending March 31, 2024.

On the financial front, Swiggy reduced its losses for FY24 to Rs 2,350.2 crore, down from Rs 4,179.3 crore the previous year, while revenue from operations grew by a robust 36 percent to Rs 11,247.4 crore, up from Rs 8,264.6 crore.

In Q1 FY25, the company reported a loss of Rs 611 crore, which widened slightly from Rs 564 crore in the same period the prior year. However, quarterly revenue surged by 35 percent to Rs 3,222.2 crore.

Swiggy plans to allocate IPO proceeds as follows: Rs 1,343.5 crore will fund investments in its subsidiary, Scootsy; Rs 703.4 crore will enhance technology and cloud infrastructure; and Rs 1,115.3 crore will support brand marketing and business promotion.

Explaining the larger budget for brand marketing, Swiggy’s CFO Rahul Bothra said that there is no need for a new capex for incurring additional tech expenses as they are already covered by existing operating expenditures.

The IPO of India’s second-largest food delivery platform combines a fresh equity issuance of Rs 4,499 crore with an offer-for-sale (OFS) of 17.5 crore shares by existing shareholders, according to the RHP.

The fresh issuance was increased from the originally planned Rs 3,750 crore, while the OFS component was reduced from 18.5 crore shares as indicated in the updated draft RHP filed on September 26.

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