Swiggy gets 'underperform' rating on listing day: Should you sell?
Swiggy, a dominant player in India's food delivery space, made its stock market debut today. However, the company's shares received an 'underperform' rating from global brokerage firm Macquarie. The firm assigned a price target of ₹325 per share for Swiggy's stock, suggesting a potential downside of about 23% from the listing price of ₹420. At the time of writing, Swiggy shares were trading at ₹448 apiece, nearly 15% up.
Macquarie forecasts profitability challenges for Swiggy
While Macquarie acknowledged Swiggy's immense growth potential, it also highlighted the potential hurdles in its path to profitability. The brokerage firm expects Swiggy to reach EBIT breakeven by FY28, based on a projected 23% compound annual growth rate in core revenue. However, it noted that the company's adjusted EBITDA margin trails due to a lower gross order value, limiting its capacity to cover central branding and employee costs.
JM Financial sets higher price target for Swiggy
Unlike Macquarie's assessment, JM Financial started coverage on Swiggy with a more optimistic price target of ₹470 per share. This indicates a potential upside of 20% from the issue price of ₹390. While it acknowledged Zomato's market leadership, the brokerage firm highlighted Swiggy as one of India's fastest-growing consumption platforms with several strategies to achieve sustainable margins.
Swiggy's market debut and financial performance
Swiggy's shares debuted on the exchanges today after a 3.59 times subscription in the primary market. The issue was priced at ₹371-390 per share. For the June 2024 quarter, Swiggy posted a net loss of ₹611 crore and revenue of ₹3,310 crore. The company reported a net loss of ₹2,350 crore and revenue of ₹11,634 crore for the year ending March 31, 2024.
Swiggy's optimistic outlook on quick commerce sector
Despite the 'underperform' rating from Macquarie and cautionary remarks about challenging valuations in the quick commerce space, Swiggy remains optimistic about its future prospects. The company cited a healthy growth trajectory over recent years and sees 'massive' potential for expansion in this sector. Swiggy's public issue, valued at $1.3 billion, was India's second-largest listing of 2024 after Hyundai Motor India's $3.3 billion IPO.
