Can Swiggy’s R170bn valuation be trusted? – Naspers/Prosus shareholders take note

Food and grocery delivery platform Swiggy has been valued at $10.7bn in its latest round of funding, up from $5.5bn in July last year. The question marks are aplenty, with Swiggy doubling its market value in six months despite listed high-growth peers losing between 30% and 70% of their market value in the same period. For example, one of Swiggy’s biggest competitors and most like-for-like listed peer, Zomato, is down 30% this year alone. If you look at overseas peers DoorDash and Deliveroo, both are down by more than 40% in the last six months.

The listed high-growth peer valuations have corrected primarily owing to concerns surrounding inflation and interest rates. High-growth companies are worst affected in periods of inflationary pressures, as inflation increases the likelihood of a higher interest rate and bond yield environment. All companies are valued as the present value of their future cash flows. A higher interest rate and bond yield environment make the future cash flows of growth stocks less attractive. The fact that Swiggy is a private company should have no bearing on its valuation, however, the lack of publicly available information makes it more challenging.

The non-Tencent portfolio that Bob van Dijk and his team are aggressively pursuing – which is centred on concentrated e-commerce and educational technology bets – is beginning to hold greater importance. The non-Tencent portfolio has a value of around $50bn and accounts for just over 20% of the company’s net asset value (Tencent stake is worth c. $170bn). However, given the majority of the investments are unlisted, its true value is more subjective. Because of Swiggy’s rather generous $5.2bn valuation uplift in a mere six months, many are starting to question the validity of these numbers.

I followed up with Abax Investments co-founder Anthony Sedgwick regarding the question marks of Swiggy’s valuation. Abax invests in Naspers and Prosus and he had this to say on the news:

It’s an entirely valid question about how to square the numbers between Swiggy’s valuation in July last year, the capital raises that have taken place, and the substantial decline in values that many of its peers have experienced over the last six odd months. We don’t have enough data on what has been publicly disclosed so far to be able to work that all out. Hopefully, we get some more data and we can work out the delta between last July and where we are currently, taking into account capital raises. It would be interesting to see what changes may or may not have occurred in the shareholders thinking about the valuation of Swiggy in the context of what has happened to all of the other major publicly listed companies; as you point out, these have all declined substantially. Let’s give them a chance. Hopefully, they produce that information and we can form an intelligent analysis of whether there is an appropriate value being placed on Swiggy at the moment. 

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