The IPO opened on Wednesday and closed on Friday, priced at Rs 371-390 per share. The gray market premium (the price investors pay for shares in the unofficial market before listing) was Rs 20 for Swiggy as of Tuesday, a 5% premium over its upper price band of Rs 390.
Analysts said weak market conditions were limiting investor appetite for the time being. Hemang Jani said, “If current market conditions continue, Swiggy may see limited upside on the day of listing or may list at par, but if market conditions improve after the U.S. election results change.” , it could go up 10-15% when it goes public.” Director of investment advisory company Finazen.
Jani said that although Zomato lags behind its rivals on most operating metrics, its superior valuation means investors could see returns of around 25-30% over two to three years. he added.
Analysts say Swiggy, which has a market share of 40%, trades at an estimated price-to-sales ratio of 6x, while Zomato, which has a market share of 60%, trades at 10x. The company’s decision to lower its IPO valuation from $14 billion to $10.2 billion bodes well for the issue, they said.
“In the current volatile market, there is little scope for significant gains from a listing, but at current valuations we are well positioned for growth from a 3-5 year perspective,” said senior Krishna Apara. So things look good for Swiggy in the long term.” A research analyst at Capitalmind said Zomato is already profitable, but Swiggy is yet to reach break-even point. “Zomato was also incurring losses when it debuted on the exchange and if Swiggy continues its growth momentum, it could follow a similar trajectory as Zomato.” Apara said.
Karan Taurani, senior vice president at Elara Capital, said Swiggy’s valuation is “pretty fair” while Zomato is down 15-20 per cent from its recent peak.
“Thus, Zomato remains an attractive opportunity for Swiggy given its track record, growth rate, larger scale and higher profitability compared to Swiggy,” Taurani said. “Swiggy’s valuation is not cheap, but it is worth a lot and we may not see that much of a premium in terms of listing returns, which is what the gray market premium is showing.”
Bajaj Broking said Swiggy has consistently reported losses during the reporting period, although its revenue has steadily increased. “Based on financial performance, the P/E ratio of the IPO is negative and as per other metrics, it can be considered aggressive pricing,” said Bajaj Broking analysts. Management is confident that by executing on its strategy and leveraging the IPO funds to expand its business offerings, it will be able to return the business to profitability within the next few years. ”
