Bought Swiggy shares over Rs 500 prior to IPO? Here’s what you can do

As Swiggy gears up for its highly anticipated IPO, the food delivery giant has set its price band with an upper limit of Rs 390 per share. This might come as a little surprise for investors who acquired the company’s unlisted shares when they were trading at around Rs 530 a month ago.

There’s still a possibility that Swiggy shares could list at a premium, far higher than the IPO price if the issue garners strong demand and market sentiments are positive.

Swiggy shares were trading at higher price a month, driven by expectations of a higher valuation of $15 billion. However, with the current IPO pricing, the company’s valuation has been lowered to $11.3 billion, reflecting a more cautious outlook.

A conservative outlook from India’s second largest food delivery company can be attributed to the recent market corrections. Analysts said the Indian stock market faces challenges like potential global instability, middle east conflict, and weak quarterly corporate earnings.

Further, a tepid debut from Hyundai India also weighed on the sentiments for big issues.

So should the pre-IPO Swiggy shareholders brace for losses? Not necessarily. According to Sebi regulations, investors who bought shares before the company’s IPO, including those who acquired them at higher valuations in the unlisted market, won’t be able to sell their shares immediately after the listing.

Also Read: Ahead of IPO, Swiggy commands a GMP of 4% over issue price

Pre-IPO investors in Swiggy, like any other IPO-bound companies, will be subject to a six-month lock-in period. The lock-in period is designed to prevent a sudden flood of shares in the market, which could lead to price volatility and impact new retail investors.

“All pre-IPO investors of Swiggy can sell their holdings six months after the listing date,” said Krishna Patwari, Founder of Wealth Wisdom India.

In the unlisted market, investors trade shares of companies that have not yet been listed on the stock exchanges. Most of these companies are privately held and their shares are often owned by founders, venture capitalists, and private equity firms.

Swiggy is also seeing a decline in demand after the IPO announcement, which is reflected in the weak GMP of just 4% over the issue price. Negative sentiments in the secondary market and fall in rival Zomato’s stock are the primary factors behind the muted GMP.

“Zomato’s share price has corrected by nearly 15% over the past month, which is a significant factor in Swiggy’s poor GMP. In the current market scenario, investors are not optimistic about listing gains,” said Patwari.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)