InvestorQ : Can you tell me about when the Swiggy IPO is likely to come and how it could perform versus Zomato?
rhea Babu made post

Can you tell me about when the Swiggy IPO is likely to come and how it could perform versus Zomato?

Riya Dwivedi answered.
1 year ago

That is a tough question. Zomato has been on the downturn with all the other digital stocks but that may not last forever. It is a matter of time before most investors will realize that there is value in these beaten-down digital stocks. But that is a different debate and for now, let me focus on the question about Swiggy. Yes, Swiggy is planning to come out with an IPO, but it is still some time away. But first a slightly larger story in this context.

There has been a subtle shift happening in the food delivery business in India. It is no longer Zomato being the most valuable followed by Swiggy. The tables have turned in favor of Swiggy. If you look at the last round of fundraising done by Swiggy and compare it with the current market cap of Zomato, then Zomato is valued at $9 billion while Swiggy has a valuation of more than $10 billion. This could be temporary, but that is what it is.

To be fair to Zomato, it is like putting the blame for the digital stock crash entirely on Zomato. Zomato gave up more than 50% in value in line with the digital stock sell-off. Zomato’s market cap has, consequently, fallen from $17 billion to about $9 billion. For now, Swiggy is not deterred by this sell-off and is seriously planning an IPO to raise $800 million. However, most likely the Swiggy IPO will only happen in the year 2023.

It was reported in Nikkei Asia that Swiggy could be considering an IPO of around $800 million. It is unclear whether the IPO will be done in India or abroad and there has been no confirmation either way. Swiggy is backed by Softbank of Japan and is preparing by adding independent directors to spruce up the board. This is normally a precursor to a mega public issue. Swiggy wants to reposition itself as an overall logistics company than just food delivery.

One of the reasons, Swiggy sharpened its lead over Zomato is the big bet on instant delivery via its Instamart business line. This business segment assures delivery of groceries and other home needs in less than 30 minutes. Swiggy will invest $700 million in Instamart, currently available in 19 cities. Swiggy is not only pitted against Zomato but also Dunzo and Grofers who are currently offering instant delivery in major Indian cities.

With all these rosy plans, the timing of the IPO will be the key. There is more realism surrounding digital IPO valuations and eventually, Swiggy will also not be spared. It remains to be seen how these experiences will impact the valuations of Swiggy as it prepares for the IPO. For now, Swiggy will be closely watching the other digital listings of 2022 for cues.