The second of India’s two biggest food-tech companies wants to deliver on its public offering promise, but the timing could play foul.

In July 2021, Zomato debuted on the stock market amid much fanfare. Rival Swiggy is now right behind, eyeing an $800 million (Rs 5,963 crore) IPO by next year, Nikkei reports.

In principle, it is a sound idea. “Swiggy will be able to monetise some of the employee stock ownership plans and enable some investors to get an exit and establish market-based valuation,” said Harish HV, managing partner at ECube Investment Advisors.

The market, however, is not exactly being a sport.

Tech IPO boom

Last August, Masayoshi Son of Softbank, a major investor in Swiggy, said the Bengaluru-based food delivery company will ensure “good returns” whenever it goes public. After all, expectations were high back then as the sentiment around new-age tech IPOs sweetened for the first time India: Zomato got listed at a 53% premium, beauty e-tailer Nykaa at 78% in November, making its founder Falguni Nayar India’s richest self-made woman.

Most of these firms had been planning IPOs for years, but 2021 was particularly opportune. The pandemic boosted business. The central bank pumped money into the economy. The stock markets performed exceedingly well, drawing interest from both first-time investors and seasoned high net worth individuals.

However, things have changed since then. Paytm’s November 2021 Paytm IPO did not pop much on debut. The share prices of Nykaa, Zomato, and Paytm have slid significantly by now.

“The recent wave of poor performances by other similar companies, combined with the likelihood of the LIC issue taking away all investible cash, is a concern and may result in a poorer response and valuation than what may have been possible a few months ago,” said Harish HV.

External factors, too, could derail plans. “Global markets will be a challenge with US Fed action, Russia-Ukraine conflict, and potential of more virus variants,” according to Yugal Joshi, a partner with consultancy Everest Group.

However, Swiggy’s greatest advantage will be that it isn’t flying in blind. It now has “a reference point to build upon”, said Anuran Dhar, a food-service analyst at GlobalData.

Swiggy’s IPO plan

Food delivery companies are especially primed to cash in on the IPO wave since they are popular among the young. Following the pandemic, their recall value has increased among middle-aged and senior citizens, too.

There is no winner in the sector, as currently Zomato and Swiggy’s sales are neck and neck. They both earned about $750 million in the quarter ended December 31, 2021.

“The industry structure is likely to remain a duopoly of Zomato and Swiggy with limited disruptions from the likes of Amazon (unsuccessful global history of last-mile delivery) and weaker offering proposition from direct ordering companies like DotPe and Thrive,” Vinit Bolinjkar, head of research at Ventura Securities told Moneycontrol at the time of Zomato’s IPO.

“This, coupled with the moats of network effects, branding, last-mile delivery, customer user behaviour (convenience and addiction) and wide geographical reach, we believe that the duopoly is likely to dominate in the visible future,” Bolinjkar said.

The scrutiny is stepped up when companies go public but any firm of some size, scale and stature wants to do it anyway for a slew of reasons: raise more fundraising from the open market, add credibility and get publicity, have stocks as a means of payment and cut back on the overall cost of capital. The first point is perhaps the most important in maintaining the battle of equals in Indian food tech.

“Swiggy needs money to fight the battle with its peers and newer entrants that have the backing of larger brands like Reliance and Tata,” said Everest Group’s Joshi.

Zomato’s fall

While short-term investors may be spooked, analysts have labelled Zomato’s fall from heights a “healthy” correction. Similarly, Swiggy does not need to fret over immediate performance, but carve out a sustainable, long-term plan, experts say.

It is a promising sign that the company already has plans to go beyond restaurant deliveries to address the convenience market as a whole.

Its grocery delivery service Instamart, morning essentials delivery business Supr Daily and parcel pick-up and drop service Genie, account for a quarter of the company’s revenues. Next, Instamart is looking to launch private labels in non-food categories like cleaning wipes and bin liners.

This article first appeared on Quartz.