India’s stock market has a rising local flavour

SINGAPORE – Swiggy is living up to its reputation for doing things quickly. The Indian food and grocery delivery company backed by Prosus and SoftBank Group will on Wednesday start taking orders for its USD 1.35 billion Mumbai initial public offering. It’s shrugging off the volatility US elections could induce in markets. The timing reflects both the issuer’s urgency and the increasing role of domestic investors in the USD 5 trillion stock market.

There are a couple of reasons to rush. Swiggy’s largest rival, publicly traded Zomato, is planning to raise up to USD 1 billion in a secondary equity offering. The USD 25 billion company is cashing up ahead of an entry by Mukesh Ambani’s giant conglomerate Reliance Industries into “quick-commerce”, the home delivery of grocery items within 10 minutes or so. What’s more, India’s economic growth is slowing and consumption signals are starting to flash red.

For its part, Swiggy has scaled back its ambition. Its targeted market value of USD 10.4 billion at the upper end of the price range is less than the headline figure of its last fundraising round in 2022. And it equates to a multiple of 6.6 times forward sales after annualizing revenue during the three months to the end of June, or nearly half the multiple of Zomato. Nonetheless, Swiggy’s shrinking premium in the grey market – a metric Indian media love to shout about – implies a muted debut when the stock officially debuts around Nov. 13.

Issuers can at least rely on a local cushion. Indians continue to pump their savings into the market at a time when overseas investors are cashing out: foreigners sold a monthly record USD 11 billion of stock in October, taking the Nifty 50 benchmark down 6%, though companies still trade on average at a punchy 24 times forward earnings. The downward drag would have been greater in the past. Foreign ownership of stocks at 17.5% is near a 12-year low, according to data provider Primeinfobase. That makes the timing of Swiggy’s share sale look slightly less bold.

CONTEXT NEWS

Indian food and grocery delivery company Swiggy will on Nov. 6 start accepting orders from retail investors for shares in its initial public offering.

The Prosus and SoftBank-backed company is seeking to raise up to USD 1.35 billion at a valuation of up to USD 10.4 billion at the upper end of the marketed price range, per a term sheet seen by Breakingviews.

(Editing by Una Galani and Aditya Srivastav)