Bid for Swiggy IPO or buy Zomato? Check analyst recommendations
Swiggy has launched its ₹11,327 crore initial public offering (IPO) today. It will be open for subscription till November 8 The offer consists of a fresh issue of 11.54 crore equity shares worth ₹4,499 crore and an offer-for-sale (OFS) portion of 17.51 crore shares worth ₹6,828.43 crore. At the upper end of the price band, the SoftBank-backed firm will be valued around ₹87,300 crore. But should you subscribe to this mega IPO or invest in Zomato stock instead?
Swiggy's market position and profitability concerns
Along with its competitor Zomato, Swiggy dominates India's online food delivery market. However, Zomato has a bigger market share and has also turned profitable. Meanwhile, Swiggy has been struggling with constant losses for the last three years. StoxBox's Akriti Mehrotra noted that "Zomato exhibits higher market traction with a robust gross order value CAGR of 23% as opposed to Swiggy's 15.5%."
Analysts weigh in on Swiggy's IPO and profitability
Swiggy's IPO has received mixed reviews from analysts. While some suggest subscribing to it due to fair valuation, others caution against it due to negative cash flows and ongoing losses. SBI Securities and Bajaj Broking recommend a long-term subscription. Anshul Jain from Lakshmisgree Investment and Securities, said, "A major portion of Swiggy IPO comprises OFS, giving exit to early investors at high prices. Swiggy has been incurring losses and there is uncertainty around its profitability."
Swiggy's market share and path to profitability
Jathin Kaithavalappil of Choice Broking echoed similar concerns about Swiggy's financial health despite its well-priced IPO valuation. Despite commanding nearly 45% of the food delivery market, Swiggy only has about 25% in quick commerce. Kaithavalappil stressed that these factors make Swiggy's path to profitability uncertain. He advised investors to apply for Swiggy IPO or buy Zomato shares depending on their risk appetite and investment horizon.
