Swiggy's $1.4 bln IPO oversubscribed as investors bet on quick-commerce boom
Institutional subscription at 485%
Retail portion subscribed 105%
Analysts see muted listing gains next week
Updates subscription levels, adds background on Indian markets, Swiggy, quick-commerce sector
By Hritam Mukherjee
Nov 8 (Reuters) -Food and grocery delivery firm Swiggy's SWIG.NS $1.4 billion initial public offering was oversubscribed on Friday, as institutional investors rushed in with orders on the final day of India's second-largest share sale this year.
The IPO had received bids for nearly thrice the shares on offer by 2:45 p.m. IST. The portionreserved for institutional investors was subscribed 485%, while the shares earmarked for retail investors were 105% subscribed.
However, analystsexpect the loss-making company to make a muted debut on stock exchanges next week,weighed down by broader market weakness and concerns that profitability may be some time away.
India's benchmark Nifty 50 index .NSEI has cooled 8% from the record highs it hit in late September, as foreign investors shiftedmoney to China after Beijing's stimulus announcements and lacklustre Indian corporate earnings.
"Institutional over-subscription on the third day ... has happened as these investors generally subscribe keeping a long-term view - which looks strong for Swiggy given the duopolistic market in the booming food delivery and "quick commerce" sector in India," said Prashanth Tapse, senior vice president of research at Mehta Equities.
"But listing gains are not expected, especially considering the subdued sentiment in the secondary markets."
While Swiggy has narrowed its annuallosses, it is yet to turn a profit, while its rival Zomato ZOMT.NS has already posted a fiscal 2024 profit after a loss the previous year.
Earlier this week, "anchor" institutional investors including Fidelity and Norway's sovereign wealth fund Norges had bought shares worth $605 million in the IPO.
Swiggy's share issue comes on the heels of Hyundai Motor India'sHYUN.NS record IPO, which received adismal response from retail investors put off by the price. The carmaker's stock is down 6% since listing.
While big ticket offerings have seen relatively muted responses, India's IPO market has been buoyant, with about 290 companies raising nearly $14 billion so far this year, roughly twice the amount raised in all of last year, LSEG data showed.
QUICK-COMMERCE PUSH
Swiggy has a 34% market share in food delivery comparedto Zomato's58%, while in "quick commerce" - where items from milk to electronics are delivered in 10 minutes - Zomato'sBlinkit has an estimated 40-45% and Swiggy's Instamart has 20-25%, according to brokerage estimates.
Swiggy has said it is openingbigger warehouses and reducing delivery times as it bets that its quick commerce business will overtake its main food delivery operations. It plans to use $140 million of its IPO proceeds to expand its warehouses.
India's quick-commerce sector has boomed in recent years, with domestic sales expected to hit $6 billion this year, up from $100 million in 2020, according to research firm Datum Intelligence.
Swiggy-IPO https://reut.rs/3AvTkVE
Reporting by Hritam Mukherjee in Bengaluru; Editing by Clarence Fernandez and Kevin Liffey
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