• Shares of Indian food delivery giant Swiggy rose over 15% on their trading debut.
• The company raised 113.27 billion Indian rupees ($1.34 billion) in its IPO that closed Monday, making it the country's second-largest listing this year.

Shares of Indian food delivery giant Swiggy soared 15% on their trading debut Wednesday after a stellar IPO — the country's second-largest this year.

The company, which is backed by SoftBank, raised 113.27 billion Indian rupees ($1.34 billion) in its IPO that closed Monday, pricing its shares at 390 rupees apiece. The IPO was reportedly oversubscribed more than three times, according to Indian business outlet Mint.

The listing comes close on the heels of Hyundai Motor India's $3.3 billion IPO in October, India's largest listing.

Swiggy shares allocated to qualified institutional buyers were subscribed more than six times, according to Mint, while the portion given to retail investors was 114% subscribed.

The IPO comprised an offer for the sale of existing shares worth 68.28 billion rupees, as well as a fresh issue of shares worth 44.99 billion rupees.

The lead bookrunners for this IPO included Kotak Mahindra Capital, J.P. Morgan India, and Citigroup Global Markets India.

Swiggy said the net proceeds of 43.59 billion rupees from the fresh issue of shares would be used to pay down borrowings in its subsidiary Scootsy, as well as for further investment in the subsidiary.

Proceeds could also be used to fund inorganic growth via acquisitions, among other things.

Swiggy shares, which got listed on Mumbai-based National Stock Exchange as well as the BSE, were last up 15% at 448.7 rupees.

Profitability concerns

In a note shortly before the stock started trading, Macquarie Equity Research said that the company had a "strong potential growth runway and improving margin," but a "long and winding road to profitability."

They pointed out that the "quick commerce" industry in India has seen rapid adoption in the past 1-2 years.

As this sector is only about 1% of India's overall grocery retail landscape, there is an "exponential latent growth runway" for Swiggy's delivery arm, Instamart, the research firm added.

However, Macquarie raised concerns over the profitability of Instamart, saying that there were headwinds to improving the unit economics of the business.

The challenges include a lower average order value if Instamart expands out of India's eight major cities, as well as inflationary pressures from regulatory actions, such as a welfare scheme for gig workers that India is reportedly working on.

Macquarie is still optimistic on Swiggy catching up with market leader Zomato on the food delivery segment. It added that while Swiggy is not as profitable as Zomato due to a smaller base and higher branding and employee costs, it could potentially bridge that gap.

Speaking to CNBC's "Street Signs Asia," Karan Turani, Senior Vice President from capital markets firm Elara Capital said that Swiggy will face relatively lower competition in the food delivery business due to there being just one key rival, Zomato.

However, the company will face "very, very high" competition in the quick commerce segment, that has four large players in the market, with e-commerce giants such as Amazon also making inroads, Turani said.