Swiggy shares on the menu: Secondary transactions gain steam ahead of IPO

Sriharsha Majety. co-founder and Group CEO of Swiggy

A clutch of Swiggy’s early investors are selling shares and partly diluting their stakes in the food delivery company ahead of its initial public offering (IPO) slated for later this year, several people aware of the transactions told Moneycontrol. Their shares are being mopped up by new investors who are upbeat on the company’s growth potential in the near future, they added.

Prosus, Accel and Elevation Capital are among the ones selling some shares in Swiggy, two people cited above said. Asset and wealth management providers such as 360 One, likely through its Special Opportunities Fund, a few high net-worth individuals (HNIs) and others are buying shares in the company, two other people aware of the transactions separately told Moneycontrol.

Secondary transactions in the run up to an IPO is common. In Swiggy’s case, Accel and Elevation Capital had first invested in the company back in 2015 and such venture funds sell some shares to eke out gains that have accumulated over the years.

Prosus, which owns around 33 percent of Swiggy, will have to dilute its stake to 25 percent or below to avoid being tagged as a promoter at the time of listing on the stock exchange which explains the partial stake sale.

Investors and bankers are buying and selling Swiggy’s shares at Rs 330-350 apiece in the secondary transactions which value the company at $9.3 billion, the sources told Moneycontrol.

In a secondary transaction, shares only change hands to go from one investor to another. The company does not receive any money in its coffers.

The fresh $9.3-billion valuation for Swiggy is about 13 percent lower than $10.7 billion, the valuation it commanded during its 2022 fundraise. To be sure, secondary transactions typically happen at a discount of about 20 percent from the company’s valuation during its last primary round.

“During conversations over the past few weeks, bankers have expressed confidence of Swiggy listing with a market capitalisation/valuation of around $10-13 billion,” a fifth person in the know told Moneycontrol.

Swiggy secondary transactions

Swiggy declined to comment. Prosus, Elevation Capital, Accel and 360 One did not reply to Moneycontrol’s queries.

If Swiggy lists on the stock exchanges at a valuation of $13 billion, it will be similar to Zomato’s market capitalisation of $13.3 billion (Rs 1 lakh crore) in July 2021, when the latter made a stellar public market debut (at a USD-INR conversion rate of Rs 75 a dollar).

About a year later, in April 2022, Gurugram-based Zomato’s share price slumped and its market capitalisation halved as investors demanded profits. The company then managed to turn its business around and reported a profitable FY24. Its share price has increased since then and the company’s market capitalisation also jumped to over $22 billion now (Rs 1.84 lakh crore) (at a USD-INR conversion rate of Rs 83 a dollar).

BSE-listed Zomato was growing faster than Bengaluru-based Swiggy, as per analysts. “Swiggy’s overall gross order value (GOV) growth stood at 26 percent for FY24 year-on-year (YoY). In comparison Zomato’s food delivery and quick-commerce vertical combined grew by 36 percent YoY in FY24,” CLSA said in a note to clients in June.

Swiggy’s trading loss stood at $158 million for FY24 which compared with Zomato’s consolidated earnings before interest, taxes, depreciation and amortisation (Ebitda) of $5 million during the same period, the note, which based its estimates on Prosus’ annual disclosures, added.

IPO prep

Swiggy kickstarted its IPO process back in March 2022, when Moneycontrol reported that it picked investment banks like ICICI Securities and JP Morgan for its IPO. Since then, it has picked board members, converted to a public company, seen its valuation being slashed, then marked up and even filed its draft IPO papers with the markets regulator. In April, it also received shareholders’ approval for a $1.25-billion IPO.

ALSO READ: Baron Capital marks up Swiggy’s valuation again, pegs value at $15.1 billion

The company also said it has received approval to raise Rs 750 crore from anchor investors in a pre-IPO round. Founded by Sriharsha Majety, Rahul Jaimini and Nandan Reddy, Swiggy has raised over $3.6 billion from SoftBank, DST Global, Alpha Wave Global, Accel, Norwest Venture Partners, Prosus, Elevation and others since its inception in 2014.