Industry experts and brokerages on Monday advised investors to avoid the upcoming initial public offering (IPO) of food delivery platform Swiggy until the company’s financial performance and growth outlook improve.

The highly anticipated IPO of online food and grocery delivery giant is set to debut on Dalal Street on November 6, aiming to raise approximately Rs 11,327.43 crore from the primary market.

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Swiggy IPO comprises a fresh issue of 11.54 crore equity shares worth Rs 4,499 crore and an offer-for-sale (OFS) component of 17.51 crore shares valued at Rs 6,828.43 crore.

SAMCO Securities said in a note to investors that waiting until Swiggy demonstrates improved financial results and a clearer path to sustainable growth would be a more prudent investment approach.

“As of the fiscal year 2024, Swiggy Limited continues to operate at a loss, in contrast to its competitor, Zomato Limited, which has recently achieved profitability. Given Swiggy’s current financial position, competitive pressures, associated risks, and valuation, its IPO appears overvalued,” said the brokerage firm.

Swiggy posted Rs 2,350 crore in net loss in the last fiscal year (FY24). The online food delivery platform, however, reduced the net loss by 44 per cent, from Rs 4,179 crore in FY23. The company saw its revenue grow 36 per cent to Rs 11,247 crore in FY24, from Rs 8,265 crore in the previous year.

According to brokerage firms, Swiggy has faced consistent net losses since its establishment in 2014, primarily due to high operational costs.

While the company’s revenue has grown with the expansion of services like Quick Commerce, Genie, and Swiggy Minis, significant investments have been required to attract users, promote brand visibility, and enhance service offerings.

“The company’s future profitability depends on its ability to manage expenses effectively and generate sufficient revenue growth. If Swiggy cannot achieve this balance, it may continue to face substantial losses in the coming years,” said SAMCO Securities.

According to a note by Bajaj Broking, key risks of Swiggy’s business include intense competition from Zomato, Zepto, and new market entrants.

“Other key risks are heavy reliance on revenue from the top 50 Indian cities. Swiggy faces potential challenges with changing food delivery regulations,” Bajaj Broking said, suggesting investors to subscribe to it for the long term.

Over the past three fiscal years, the company has consistently reported losses on a consolidated basis. In FY22, the total income was Rs 6,119.78 crore, with a net loss of Rs 3,628.90 crore.

The following year, FY23, saw an increase in total income to Rs 8,714.45 crore, but the net loss also increased to Rs 4,179.31 crore.

In FY24, the total income rose further to Rs 11,634.35 crore, while the net loss reduced to Rs 2,350.24 crore.

In the first quarter of FY25, ending on June 30, 2024, the company recorded a total income of Rs 3,310.11 crore and a net loss of Rs 611.01 crore.

“These figures indicate that the company has been experiencing continuous financial losses over the reported periods,” said Bajaj Broking in its note.