Shares of Swiggy tanked over 7% to plunge to an all-time low of Rs 297 after the lock-in period for IPO shareholders expired today. This opened the gates for a total of 83% shareholders to become eligible to trade off their holdings.
With the lock-in period expiring, around 83% of Swiggy’s shareholders are now eligible to trade their shares, raising concerns about potential near-term pressure on the stock
Shares of Swiggy tanked over 7% to plunge to an all-time low of Rs 297 after the lock-in period for IPO shareholders expired today. This opened the gates for a total of 83% shareholders to become eligible to trade off their holdings.
As per SEBI, non-promoter, pre-IPO investors are required to go through a mandatory lock-in of 6 months post listing of their stock on the exchanges. While the lock-in expiry does not necessarily mean that an investor will go ahead an liquidate their shares, it does opens up the opportunity for them to do so.
As per an analysis by brokerage firm JM Financial, the cost of acquisition of shares owned by pre-IPO investors of Swiggy pointed towards several sitting on multi-fold gains on their investments, making the lock-in expire a lucrative opportunity to book some profits.
“While a few of them had partly liquidated their positions in the run-up to the company’s public listing as well as during the IPO, a large chunk of gains still remains unrealised. Given the quantum of these gains and basis past actions of pre-IPO investors (mainly PE/VC/Chinese investors) across listed Internet names, we believe a sizeable proportion of Swiggy’s stock can get traded in a not-so-distant future post lock-in expiry, despite the fact that the stock is trading well below its IPO price,” analysts at JM Financial warned.
Accordingly, they expect shares of Swiggy to remain volatile in the near-term. Fundamentally too, Swiggy’s earnings seem to be going through a rough patch amid heating competition, faltering demand and unavailability of delivery workers.
Swiggy’s net loss for the March quarter nearly doubled on year to Rs 1,081 crore, as compared to Rs 554 crore reported in the corresponding quarter of the previous fiscal. This was despite the 45% surge in revenue to Rs 4,410 crore in Q4.
Swiggy outpaced Zomato in food delivery for the second quarter running. In contrast, within quick commerce, Blinkit continues to outpace Instamart's growth despite being nearly twice its size. To that effect, the company’s management has also highlighted heightened competition in the space and has adjusted its guidance on contribution margin breakeven from three quarters to a revised range of three to five quarters.