blog/article-blog/Swiggy Extends 20% Discount to High Net Worth Individuals in Pre-IPO Deal

Apr 17, 2024

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Swiggy Extends 20% Discount to High Net Worth Individuals in Pre-IPO Deal

The food delivery industry has been a dynamic and rapidly evolving sector, with technology-driven services reshaping the way consumers interact with restaurants and food outlets. At the forefront of this transformation is Swiggy, a leading food delivery unicorn that has revolutionized the convenience of dining with just a few clicks. As the industry continues to evolve, Swiggy has emerged as a formidable player. With its innovative technology and customer-centric approach, Swiggy expanded rapidly, operating in over 500 cities and diversifying into on-demand grocery deliveries and instant pick-up/drop-off services.


The Food Delivery Industry Landscape


Global Growth: The online food delivery market is predicted to reach over a trillion US dollars in 2023, driven by rising internet penetration and smartphone usage.


Third-Party Services: Platforms like Uber Eats, DoorDash, and Grubhub have reshaped the industry, offering convenience but impacting restaurant profit margins.


Ghost Kitchens: Affordable start-up options like ghost kitchens and cloud kitchens are gaining traction, reducing overhead costs for aspiring food entrepreneurs.


Swiggy, the popular food delivery platform, has recently made waves in the investment world by offering a 20% discount to High Net Worth Individuals (HNIs) as part of its pre-IPO strategy. Let's explore the reasons behind this move.


According to a report by Entrackr, Swiggy is providing an exclusive opportunity for HNIs to purchase its shares at a significant markdown—20% less than the current valuation. The proposed share price is ₹350 each, which would value the company at an impressive ₹80,000 crore. This move aims to attract savvy investors who recognize the potential of Swiggy's growth trajectory.


Swiggy's Journey


- 2014: Swiggy starts its journey in Bengaluru.


- 2018: The company is valued at around $3.3 billion.


- 2020: Amidst the pandemic, Swiggy's valuation rises to $3.6 billion.


- 2021: A massive funding round brings in $1.25 billion, pushing the valuation to $5.5 billion.


- 2022: Swiggy raises $700 million at a valuation of $10.7 billion.


- 2023: Baron Capital values Swiggy at $12.1 billion, a 13% increase from the last fundraise.


Understanding Swiggy's Valuation and Discount Offer


Swiggy's wealth managers are pitching the deal at a valuation of Rs 80,000 crore ($9.6 billion), which is approximately a 20% discount from its current valuation of around $12 billion.  The minimum investment threshold is set at Rs 25 lakh, making it an exclusive opportunity for the affluent segment.


Baron Capital, a participant in Swiggy's 2022 funding round, has marked up the fair value of its holding in Swiggy to $12.1 billion as of December 31, 2023. This optimistic assessment comes despite other Indian startups facing valuation cuts, highlighting Swiggy's strong market position and growth prospects.

Market Implications


This move comes at a time when Swiggy's valuation was recently marked up by 19% to $12.7 billion by one of its investors, Invesco. The discount offer could potentially broaden the spectrum of investors and may exceed the 20% threshold, indicating a bullish outlook for the company.


While Swiggy is making moves  ahead with its IPO plans, it's worth noting that its rival, Zomato, already went public in 2021 and currently holds a market cap of around $20.7 billion. Zomato has also seen a 22% increase in share price, pushing  Swiggy's latest valuation still lags behind Zomato's, but the pre-IPO discount could be a game-changer in leveling the playing field.


Swiggy IPO

Investor Confidence

Swiggy's aggressive valuation and the subsequent discount offer reflect the company's confidence in its business model and future growth prospects. It also showcases the robust investor interest in Indian startups, which have been witnessing a surge in valuations and successful funding rounds.


The rationale for Swiggy's discount offering can be attributed to several strategic factors:


IPO Preparation: Swiggy is gearing up for its initial public offering (IPO), a critical milestone for any company. By extending this discount, Swiggy aims to create a buzz among potential investors and generate interest ahead of the IPO.


Liquidity Boost: The participation of HNIs injects liquidity into the market. Swiggy's pre-IPO deal allows these investors to acquire shares at a reduced price, encouraging them to commit capital early.


Competitive Landscape: Swiggy faces fierce competition from players like Zomato. By offering an attractive discount, Swiggy aims to differentiate itself and secure investor confidence.


Attracting Investors: By offering a discount, Swiggy aims to attract HNIs, ensuring a strong investor base pre-IPO.


Valuation Justification: With a reported valuation of ₹80,000 crore, the discount could be a tactic to justify the high valuation by creating a demand surge.


Market Sentiment: Amidst a funding slowdown, such discounts can reflect growing optimism and potentially catalyze market sentiment.


Impact of Discount Offering: 


  • Investor Perception: Discounts can enhance investor confidence, portraying the company as a lucrative investment opportunity.


  • Valuation Impact: While discounts can initially lower the valuation, they may lead to higher demand and potentially increase the overall valuation post-IPO.


  •  Market Trends: Swiggy's move sets a precedent in the market, possibly influencing other startups to adopt similar strategies.


Conclusion


Swiggy pre-IPO discount offer to HNIs is a bold step that highlights the company's growth trajectory and its readiness to take on the public markets. As the company continues to evolve, it will be interesting to see how this discount offering will influence its market valuation and overall success in the competitive landscape of food delivery services.

Category: Investments

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