Valuation specialist Aswath Damodaran, typically called the “Dean of Valuation,” evaluated in on Swiggy’s IPO, warning that this isn’t simply a bank on a food distribution application– it’s a risk in the future of India’s financial and social change.
Speaking on The India Opportunity Podcast with Shrishti Sahu, Damodaran described, “With Swiggy, I would look at the same determinants…it’s a joint bet on India’s growth as a country, because, let’s face it, without India growing into its income, restaurants will not be able to make money, and without restaurants, you will not get restaurant delivery.”
Comparing Swiggy with Zomato, Damodaran stressed that both business operate a “time arbitrage” version, leveraging India’s metropolitan facilities difficulties to conserve time for consumers.
“Zomato is arbitraging that logistics problem, and Swiggy might be able to as well,” he claimed, including that they’re maximizing the mess of metropolitan facilities that makes brief duties taxing.
On the much-hyped “quick-commerce” pattern in India, where grocery stores and basics are supplied within mins, Damodaran stayed unconvinced. “I’m never quite sure what to make of words that emerge, like quick commerce,” he claimed.
“But if there’s one advantage Swiggy and Zomato have, it’s their existing platform. They already have drivers, and expanding their model—asking drivers to pick up groceries or even laundry—is an extension of what they do.”
As for Swiggy’s appraisal, Damodaran attracted a clear difference in between “price” and “value,” clarifying that the reduced several Swiggy might trade at shows its setting behind Zomato out there. “If you ask me, should Swiggy trade at a lower multiple? I’d say yes. Zomato is further advanced in its life cycle, has shown it can turn from losses to profits, and Swiggy hasn’t done that,” he claimed.
Damodaran additionally highlighted the relevance of reasonable assumptions for lasting financiers. “Look past the current numbers. You’re not buying last year’s financial statement…you’re buying potential, the expectation that India’s infrastructure issues won’t disappear, and these companies will leverage that to become first movers,” he encouraged.
Swiggy’s IPO obtained a moderate reaction, with a registration price of simply over 3 times and a grey market costs of just 1 per share, showing careful positive outlook. With a background of bottom lines and continuous capital problems, Swiggy recommends to make use of IPO funds to buy its modern technology and brand name growth, a step Damodaran thinks is necessary for future development in a market as unstable as India’s.
Disclaimer: Business Today gives securities market information for educational objectives just and must not be interpreted as financial investment recommendations. Readers are motivated to speak with a certified economic consultant prior to making any kind of financial investment choices.
