India seems to have moved from the Coldplay ticket row to the pre-IPO investment gamble—Swiggy’s shares are being sold and re-sold for higher prices in the grey market.
Investors have spent the last three years twiddling their thumbs, waiting for the younger half of India’s food-delivery duopoly to finally go public. And with Zomato’s stock, listed in 2021, spiking 174% over the past year, they seem ready to toss caution to the wind.
The bet
Many are betting that the valuation gap between Swiggy’s market capitalization —at current grey-market prices—of around 85,000-90,000 crore will be closer to Zomato’s ₹2.5 trillion m-cap.
“I bought Swiggy’s pre-IPO shares because, I think, it would catch up with Zomato. Zomato’s m-cap is ₹2.5 trillion, and Swiggy’s m-cap after the IPO is expected to be ₹1 trillion. I bought Zomato’s shares in 2022 through my parents’ accounts after a correction in the stock’s price. The investment has risen 2-3X since then. So, in the worst-case scenario, if Swiggy corrects, I would just average down. It’s just a ₹50,000 investment at around ₹480 per share,” said Harsh Patwari, a CA final-year student from Kolkata.
Some bigger investors take a more nuanced view. “I don’t think their m-cap will converge with Zomato. I think it would always trade at a discount to Zomato, considering the difference in the execution qualities. Still, even if it were to be half of Zomato’s valuation, there is a 25-30% upside in the short term,” said Vikram Koul, a director at a pharmaceutical and medical consumables company.
“Swiggy is in a duopoly, and its ability to raise prices gives me comfort,” said Dhaval Gandhi, a Mumbai-based business owner who invested large amounts in the food-delivery company from his family office.
In Swiggy’s case, many fintech platforms, such as InCred Wealth, have brought organized buying and selling to a largely disorganized shadowy market. These platforms conduct KYC (know-your-customer) checks to onboard investors and credit shares upon payment.
However, delivery is not instant. The time it takes to receive the shares can vary depending on the demand-supply situation, from one day to an average of six months for unlisted shares of the National Stock Exchange. It’s a 3-4 week wait for Swiggy investors.
High-net-worth investors have applied for CCPS (compulsorily convertible preference shares) with a minimum ticket size of ₹5.5 lakh. The advantage is that these shares trade at a lower price than standalone shares. Over the past few months, many investors have bought CCPS in the ₹330-370 per share range compared to ₹450-500 for standalone shares. This gives them a margin of comfort. Some have pooled money to meet the higher ticket size.
“I have bought Swiggy shares via co-investing. The thesis is that Swiggy has almost half the market share of Zomato, and the m-cap should converge with it. Since we bought a big lot of ₹1 crore, we got a discount and distributed it among friends. We got the shares at ₹ ₹360, which is below the standalone equity price of around ₹450. So, at least that gap will provide a cushion,” said Tanmay Shah, a Surat-based investment banker.
The risks
Nothing can negate the risks associated with buying unlisted shares. Investors may not actually get the shares they have paid for, unlike listed equities, there are no exchange mechanisms to enforce contracts. “I have seen dealers cancelling deals for the NSE shares as their price has zoomed,” said Atul Modani, a Pune-based chartered accountant.
Unlisted shares of the NSE have risen from about ₹3,000 at the end of 2023 to around ₹7,000 at present. “I couldn’t buy the NSE shares in November 2023. There was a difference between the price I was willing to pay and what they wanted (a private banker was arranging it). It was ₹3,300 back then, now zoomed up to approximately ₹7,000 (ex-bonus). But I got SBI AMC in February 2024 and some others. About 7% of my portfolio in all,” said Neelmani Bagaria, a financial product enthusiast and consultant.
“Newbies to this space should go through the securities (brokerage) arms of large banks or respectable firms. Don’t fall prey to scams,” Bagaria added.
“Investors looking to make quick gains by investing in pre-IPO shares should be aware that there could be a slip between the cup and the lip as many times the listing plans could get delayed like in the case of the NSE. So, unless they are willing to let their money stay put for a long term, they should avoid such proposals,” said Abhishek Kumar, a Sebi-registered investment advisor and founder and chief investment advisor at Sahaj Money.
Besides, the unlisted companies themselves may not play ball. A surge in Reliance Retail pre-IPO shares in 2023, almost to ₹2,500 levels, saw investor hopes dashed after the company went for a capital reduction, forcing investors to sell shares at ₹1,362 apiece.
A similar frenzy played out with PharmEasy in 2021. Its share price zoomed to ₹60-70 levels. However, the IPO never happened, and the shares are now trading at around ₹10.
Experts also warn about the regulatory vacuum. “Platforms matching buyers and sellers in this market without a licence are essentially running illegal exchanges,” said Ajay Rotti, founder at Tax Compaas.
Not all investors run after “hot” pre-IPO shares like Swiggy’s. Some buy unlisted shares with a long-term outlook. “I bought unlisted shares of HDB Financial Services for ₹750 and SBI Mutual Fund for about ₹2,000 through a respectable player, Tata Capital, because this market is murky. There are many unknowns. How many shares are outstanding? Sometimes, bondholders or employees have the right to convert into shares, and then there is the fair price. I checked on a few websites, but the information is still limited,” said Nand Kishore Divakarla, a Bengaluru-based corporate executive.
