Swiggy, the food delivery giant that once promised to deliver joy to our doorstep, is now delivering disappointment to investors. The much-anticipated IPO, which was supposed to be a feast for investors, has now turned into a stale food (at least Zomato kept the interests of the investors high during its IPO days – if not after listing). The Grey Market Price (GMP), a key indicator of investor sentiment, has proved that the Swiggy food delivery bag is poorly balanced (the GMP is hovering around Rs 20 per share)
It seems the market’s appetite for Swiggy’s IPO has waned faster than a plate of cold biryani. Investors, who were once salivating at the prospect of a mouthwatering return on investment, are now feeling a bit of indigestion. The IPO, which was initially seen as a golden opportunity for investors in the food sector, has not turned into a bitter pill to swallow.
Some analysts believe that the market is concerned about Swiggy’s high valuation. Others point to the company’s high operating costs and low profitability (and they cannot increase their profitability on a standalone basis as they have a tough competition from Zomato). And let’s not forget the impact of rising inflation and interest rates, which have dampened investor sentiment across companies.
But perhaps the most significant factor is the changing dynamics of the food delivery market. With increasing competition from other players (don’t forget ONDC), Swiggy is facing pressure to maintain its market share. This has spooked the would-be investors.
Hyundai’s recent IPO is a stark reminder that even the most promising IPOs can fizzle out. It’s a humbling experience for Swiggy which was once hailed as a disruptor in the food delivery industry. Now, it seems, the company is facing a bit of disruption of its own.
Only time will tell if Swiggy overcomes this setback. Zomato did, but after a long time. But one thing is certain. The company’s IPO has served up a lesson in humility. It’s a reminder that even the biggest players in the market are not immune to the whims of fate.
As for investors, approach IPOs with caution. Do your own research and invest wisely. After all, you wouldn’t want to invest your money in a company which wouldn’t be in a position to serve food on your plate. The last thing you want is to end up with a plate of cold shares.
(The writer is the Assistant Professor – Finance at SVKM’s Narsee Monjee Institute of Management Studies (NMIMS) Deemed-to-be University)
