Swiggy IPO: All You Need to Know, Impact on Zomato Shares

Food and grocery delivery major Swiggy has filed its updated draft papers with markets regulator Sebi to raise funds through its much-anticipated Rs 10,000-crore IPO. The updated draft filing comes after Swiggy’s confidential offer document was approved by Sebi earlier this week.

Swiggy IPO Size

The proposed IPO comprises a fresh issue of equity shares worth Rs 3,750 crore and an offer-for-sale (OFS) of 18.52 crore equity shares by existing shareholders, according to the updated draft red herring prospectus (UDRHP).

Those selling shares in the OFS route are — Accel India IV (Mauritius) Ltd, Apoletto Asia Ltd, Alpha Wave Ventures, LP, Coatue PE Asia XI LLC, DST EuroAsia V BV, Elevation Capital V Ltd, Inspired Elite Investments Ltd, MIH India Food Holdings BV, Norwest Venture Partners VII-A Mauritius and Tencent Cloud Europe BV.

According to a PTI report citing sources, Swiggy plans to garner up to Rs 3,750 crore funds through fresh equity shares, in addition to an offer-for-sale component of up to Rs 6,664 crore.

Swiggy Pre-IPO

Swiggy is also looking to raise funds a pre-IPO round. If this occurs, the size of the fresh issue will be reduced accordingly. The company filed its offer document on April 30 through the confidential pre-filing route.

Under the confidential filing process, Sebi reviews confidential DRHP and provides comments on it. Thereafter, the company going public is required to file an update to the confidential DRHP (UDRHP-I) after incorporating the regulator’s comments. This UPDRHP-I is made available for public comments over 21 days.

Finally, after incorporating the changes due to public comments, the company is required to update the DRHP-II (UDRHP-II).

Swiggy IPO Opening Date

Swiggy can launch its IPO once the final prospectus is filed.

Swiggy IPO Proceeds Utility

Going by the IPO papers, proceeds from the fresh issue to the tune of Rs 137.41 crore will be used for debt payment of subsidiary Scootsy.

Additionally, Rs 982.40 crore will be invested in Scootsy to expand the Dark Store network in the Quick Commerce segment, with Rs 559.10 crore allocated for setting up Dark Stores and Rs 423.30 crore for lease or license payments.

The company will also invest Rs 586.20 crore in technology and cloud infrastructure, Rs 929.50 crore for brand marketing and business promotion, and funds will be allocated for inorganic growth and general corporate purposes.

Founded in 2014, Swiggy had a valuation of nearly USD 13 billion in April. The company’s annual revenue stood at USD 1.09 billion as of March 31, 2023, and has more than 4,700 employees, according to Tracxn, a global startup data platform.

In April, sources had previously stated that Swiggy received shareholders’ approval for an IPO to raise Rs 10,414 crore fund through the issue of fresh equity shares and an offer for sale.

A special resolution was passed at an extraordinary general meeting of Swiggy on April 23, they stated.

Impact on Zomato Shares

According to a market analyst, the Swiggy IPO announcement is positive for Zomato as of now. “Usually when a substituting company comes with an IPO, the existing listing company’s shares tend to get a positive push.”

Recently, brokerages have also given their ‘buy’ calls to the IPO.

In its note on September 22, brokerage firm JM Financial said Zomato’s board has approved the acquisition of Paytm’s movies and events ticketing business which would help it expand presence in the entertainment ticketing category (currently part of Going-out segment alongside dining-out business). Post M&A, Zomato would become the second largest entertainment ticketing platform in the country, behind only Bookmyshow.

“In fact, the deal would enable Zomato to offer its customers a wide range of booking use cases spread across movie tickets, IPL tickets, dining-out table reservations, live entertainment and weekend getaways, through a dedicated app ‘District’ (to be launched in next few weeks). The all-cash deal value is INR 20.48bn, implying a valuation of ~1x FY24 EV/GOV (~7x Sales / ~71x Adj. EBITDA), towards the higher end of our expectation (refer our report). Going-out segment will likely operate at break-even levels in the near term as company will likely focus on growing GOV to INR 100bn+ by FY26 (3x FY24), over the medium to long term management expects Adj. EBITDA margin to expand to 4-5% (as % of GOV). Management’s strong demonstrated execution in the past and absence of meaningful organised competition (barring Bookmyshow) makes us believe Going-out could be the next big success out of Zomato. We maintain ‘BUY’ with revised TP of INR 300 (vs. INR 260 earlier) derived basis 75x FY27 PER,” JM Financial has said.

Shares of Zomato on Friday were trading higher by Rs 0.65 or 0.23 per cent at Rs 284.5 apiece on the BSE.