Daybreak - Swiggy's post-IPO pains are a lesson for rich Indians playing the pre-listing game

Episode Date: March 9, 2025

When the much-awaited Swiggy IPO took place in November last year, many HNIs make put in their money into the company. Some made smaller investments of more than Rs 2 lakh and the others who bought stocks for over Rs 10 lakh. But they weren’t buying stocks because they believed in the real value or long-term potential of these shares. They bought them because they assumed someone else will buy them at an even higher price. The Ken reporter Suprita spoke to a VP of a Bengaluru-based unicorn. They told him that they just though they were getting a good deal at a discounted price. They even sold off some of their SIPs and even their Zomato shares. When many HNIs buy unlisted stocks before a company's IPO, they drive up the stock price. But once the pool of these HNI buyers dries up, the bubble bursts.It is the theory of greater fools and it played out during Swiggy's IPO when  brokers pitched Swiggy shares as a piece of India’s hottest food-delivery and oldest quick-commerce giant, that too at a discount.But a discount to what?Because Swiggy’s market capitalisation is right now stands at under $9 billion as compared to its listing valuation of $13 billion. So what happens to HNIs like the unicorn VP who bought Swiggy shares before its IPO?Tune in.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.The Ken is hosting its first live subscriber event! Join two long-term and contrarian CEOs, Nithin Kamath of Zerodha and Deepak Shenoy of Capitalmind, as they discuss the mental models, decision making frameworks, and potential outcomes related to a very real possibility: an extended stock market winter that lasts 24 months or more. Click here to buy your tickets. 

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Have you heard of the greater fools theory? Before an IPO or public listing of a company is supposed to take place, many high net worth individuals or H&Is put their money into the company.

There are some who make smaller investments of more than 2 lakh rupees, and then there are the others who buy stocks for over 10 lakh rupees. But these people are not buying these stocks because they believe in the real value or the long-term potential of these shares. They are buying them because they assume someone else will buy them at an even higher price. When the much-awaited Swiggy IPO took place in November last year, a lot of people did this. My colleague Suprit spoke to the vice president of a Bangalore-based Unicon. He said that he just thought he was getting a good deal at a discounted price.

This person even sold off some of his SIPs and Zomato shares to do this. So what essentially happens in such situations is that these buyers keep driving up the stock price. But once the pool of these H&Is or high-net-worth individual buyers dries up, the bubble bursts. People who do this are called greater fools. So, before the Swiggy IPO, there were brokers pitching Swiggy shares to these edge and their sell? Would you like a piece of India's hottest food delivery and oldest quick commerce giant at a discount? Now, if you're a true daybreak listener, you would not have bought this argument in the first place. But anyway, a discount still sounds great, right?

But the question to ask you is a discount to what? because you know how much Swiggy's market cap is right now? Under $9 billion. Now, if you remember, Swiggy had listed at nearly a $13 billion valuation. So what do you think happened to the Unicorn Vice President who bought these Swiggy shares before its IPO? He now thinks that even a fixed deposit would have been a better choice than buying those shares. Welcome to Daybreak, a business podcast from the Ken.

I'm your host, Nickda Sharma, and I Don't Chase the New Sight. Instead, every day of the week, my colleague Rahal Philippos and I will bring you one business story that is worth understanding and worth your time. Today is Monday, the 10th of March. See, in all fairness, it's not just Swiggy. Five out of the 12 tech companies that listed in the last two years are seeing their stocks trade below their IPO price. This includes D2C beauty brand Mama Earth, EV manufacturer Ola Electric and baby care

retailer first scribe. But we are talking about Swiggy today because it is a great example of what happens to a market when more and more H&Is or high net worth individuals enter the picture. Let's take Swiggy's share unlocks, for example. In the weeks after its listing, multiple tranches of Swiggy shares were freed up. First was nearly 3 million shares on the 29th of January, then 300,000 more on the 31st of January, and another 100,000 on the 9th,000. 19th of February. And there was also the big one, 65 million anchor investor shares on the 10th of February. While there have been no noticeable bulk transactions, Swiggy's stock price is still in the red. As of today, its value is 360 rupees. Now, its IPO price was 390 apse. So, you see, when the

greater fools theory usually plays out in a market, the ones who essentially make money are either the early investors or venture capitalists on one end of the investment spectrum and retail investors on the other end. H&Is, like the Unicorn VP that we spoke about earlier, get stuck in the middle. But this obviously did not stop the brokers from hyping up Swiggy shares. Charan Kumar Rajendran, the co-founder of Strutei, which is an unlisted broker based in Chennai, told the Ken that they sold over 800 crore rupees worth of unlisted Swiggy shares in in the two months before its IPO. These shares, mostly in the form of compulsory convertible preferences shares or CCPS,

were purchased at different prices starting from $320 per share and then sold for a commission of up to 1%. CCPS, by the way, have to be converted into equity shares after a specific time period. Rajendron told us that Strutay completed over 600 transactions to sell these shares. And while buyers came from all over, around 200 deals likely involved high net worth individuals or H&Is. This also explains why during the Swiggy IPO, H&I is only subscribed to 41% of their all lotted share quota, the lowest of all investor groups. But again, important to note here is that it is usually hard to recognize H&I purchases in the unlisted market. Anyway, the point that we're trying to make here is that lately,

pre-IPO investments have become quite the hot ticket for India's richest. Brokers have been selling them as the key to getting early access to unicorns before they hit the market. Many, including Zemato, Ola Electric and others, have chosen to go for pre-IPO placements before launching their actual IPOs. But, as we all know, it doesn't always go down well. Remember what I told you about H&I's earlier? When the Greater Fool's theory usually plays out in a market, market, H&Is get stuck in the middle. Muneesh Randev, the founder and chief executive of Servin Family Office, explained it to us. He said that for H&Is, the trade makes sense only when, one, their shares cheaper than the IPO price,

two, they secure allocation in an oversubscribed listing, and three, they believe in the company's long-term value. And he also made a very interesting point. He told us how these tech listings are a very new phenomenon. Like, till a few years back, they could not even think of loss-making companies being allowed to list and take in retail investors' money. Also, back then, the number of H&Is in India was much smaller, around 250,000. And that is no longer the case. If you remember, in an earlier episode of Daybreak, we spoke about wealth management companies and how they are catering to more and more newly minted H&Is.

So, you see, it is a combination of things. Also, startups from India in general lately are merely managing their profitability. That's all they're doing. So again, this is not just a swiggy problem alone. Right now, it seems like pre-IPO valuations serve more as an exit strategy for VCs, private equity investors and promoters, than as a growth capital tool for companies. A wealth manager from Mumbai told us that the entire blanket merger can be interpreted as a narrative building exercise. Because the Japanese investment giant soft bank needed an exit. But again,

how Blinket has actually turned out to be the key source of revenue for Zomato is a whole different story. But that does not mean that the storytelling stops. The wealth manager said that it is the same playbook everywhere. The common thread, startups keep shifting their core pitch as long as investors keep buying. Take OLA for example. It started with OLA cabs making headlines globally and attracting top-tier investors by selling the story of transforming Indian mobility. And when that narrative began losing its steam, CEO Bhaavish Agarwal pivoted to Ola Electric. And now that even Ola Electric's story is not as compelling anymore, he has shifted focus to Crotrim, his new AI venture.

Now, because of this chase, the wealth manager explained to us that many startups end up ignoring some core financial parameters, which could be as simple, as earnings per share, price to book value ratio and enterprise value to revenue. But in the end, it is the H&Is who take the biggest hit. They buy into the pitch without checking the fine print. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletter,

and podcast extras. To subscribe, head to the ken.com and click on the red subscribe button on top of the Ken website. Today's episode was hosted by Snigda Sharma and edited by Rajiv Siyadh.