(Bloomberg) — Swiggy Ltd.’s shares climbed in their Mumbai debut, signaling a vote of confidence for large initial public offerings in India.
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The food-delivery firm listed at 416.20 rupees before rising as high as 420.05 rupees. The shares were sold at 390 rupees, the top of the marketed range.
The $1.3 billion sale, the nation’s second-largest listing this year after Hyundai Motor India Ltd.’s record $3.3 billion IPO, comes as global funds are dumping local shares on concerns over earnings growth. Initial demand for Swiggy’s IPO was subdued, but institutional demand on the final day drove it to a strong close.
For many, Swiggy’s IPO was seen as a test of investor appetite for the country’s burgeoning quick-commerce sector. The market debut pits the company against larger listed rival Zomato and privately-held Zepto in India’s rapid delivery space. According to CLSA, these firms are set to top $78 billion in combined gross orders within a decade.
“We see immense growth potential given quick commerce is essentially a play for the broader retail market, which was approximately $1 trillion in 2022,” JM Financial Institutional Securities Pvt. analysts wrote in a note. The brokerage initiated coverage on Swiggy with a buy rating and a price target of 470 rupees.
The listing gain bucks the recent trend of poor showing by large first-time offerings in India. IPOs raising more than $1 billion since 2019 have fallen about 3% on average on their first trading day, data compiled by Bloomberg show.
Hyundai Motor India’s shares dipped on debut last month, and are trading 12% below the IPO price.
While Swiggy’s IPO attracted global funds including Fidelity International, the loss-making company faces challenges. Competition among quick commerce firms has caught the attention of India’s antitrust watchdog, which is investigating the company for alleged unfair practices. The probe is at a preliminary stage and no final order has been issued, Swiggy said in a statement Monday.
Despite these hurdles, Swiggy’s growth is backed by the surge in online demand within one of the fastest-growing major economies. Its market share stood at about 37%, just behind Zomato’s 39% as of March 31, according to Chryseum Advisors, which tracks unlisted shares.
