Zomato shares drop up to 3% as Swiggy reportedly gets SEBI's nod to launch IPO

Founded in 2004, Swiggy is headquartered in Bangalore and operates in more than 580 cities. 

Swiggy, which is backed by investors such as SoftBank and Accel and valued at $9.3 billion as of August 2023, submitted its offer document on April 30 this year using the confidential pre-filing route, meaning details have been kept under wraps for now.

However, reports suggest Swiggy is looking to raise ₹11,000 crore with a fresh issue worth ₹5,000 crore. 

Goldman Sachs said in April quick deliveries accounted for $5 billion, or 45%, of India's $11 billion online grocery market and forecast the segment to reach a 70% share of that market by 2030.

Reuters in June reported that Swiggy was increasingly focusing on its Instamart business.

Swiggy's food delivery business is profitable, but the grocery delivery Instamart business is still loss-making, sources say. The company has around 550 grocery warehouses in 35 Indian cities, as per a Reuters report.

Zomato shares have been one of the top performers in the past 12–15 months. The stock has rallied 192% in the past 12 months and 131% so far in 2024. 

The impressive run of Zomato's stock led to Aswath Damodaran, professor of finance at the Stern School of Business at New York University, popularly known as the "Dean of Valuation," acknowledging that his initial valuation of Zomato might have been an underestimation due to unforeseen advancements in the dining out trend in India and the successful acquisition of Blinkit.

Damodaran said that even if the value of Zomato is ₹125, it still might be overvalued.

Damodaran also underlined how Zomato took advantage of the infrastructural challenges in urban India, such as traffic and parking issues.