IPO Note : Swiggy Ltd By Nirmal Bang Ltd
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Swiggy Ltd
BACKGROUND
Incorporated in 2014, Swiggy is a popular online food ordering and delivery partner, offering a variety of convenience services. These include food delivery, restaurant reservations via “Dineout,” event bookings with “SteppingOut,” parcel pick-up and drop-off through “Genie,” and hyperlocal commerce activities like Swiggy Minis and also expanded into grocery delivery with Instamart and operates in over 580 cities.
Objects and Details of the Issue:
Total issue size is Rs. 11,327 Crore comprising of Rs. 4,499 Crore from Fresh Issue and Rs. 6,828 crore from Offer For Sale.
Net Proceeds from the Fresh Issue shall be utilized towards:
1. Brand marketing and business promotion expenses.
2. Expansion of dark stores.
3. Acquisitions and corporate purposes.
4. Technology and cloud infrastructure investment.
Investment Rationale:
1. Unified App for all food related businesses.
2. Expansion of Dark Stores and basket sizes for Quick Commerce.
3. Booming Food Delivery and Quick Commerce Industry would accommodate all the competitors.
Valuation and Recommendation:
Swiggy is a well recalled brand in the booming food delivery and quick commerce market. While the industry is evolving with huge structural transformations underway, we believe Swiggy with its innovation led approach is well positioned to garner good market share and turn profitable in the coming quarters. The company lags on many key parameters when compared with Zomato; however we believe this gap would narrow down eventually and Swiggy too would enjoy the early entrant benefits of the quick commerce industry. Post IPO, Swiggy will have cash of ~ Rs.10,000 crore and will aid for further expansion of business. The IPO is priced at 7.7x EV/Sales FY24 which is 57% discount to its listed peer Zomato. Given the growth prospects of Quick Commerce Industry and discounted valuations, we recommend ‘Subscribe’ to the issue.
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SEBI Registration number is INH000001766
