Is Swiggy’s IPO a Smart Investment? Here’s What You Need to Know.

Company Overview

Swiggy is India's leading food delivery platform, founded in 2014 by Sriharsha Majety, Nandan Reddy, and Rahul Jaimini. The company is headquartered in Bengaluru, Karnataka, and operates in over 500 cities across India, it is backed by prominent investors such as SoftBank, Prosus, and Accel Partners, and has established itself as a pioneer in the food delivery space, connecting customers with local restaurants and stores. Swiggy is a tech-driven, consumer-first platform with offerings, offering delivery services for food, groceries, and other essentials. Swiggy Instamart (grocery and household delivery), Dine out (restaurant reservations), and Genie (pickup/drop-off services). It is a leader in India's hyperlocal commerce market and has extended its services across multiple consumer needs by fostering strong relationships with restaurant and merchant partners. The company also provides various in-app payment solutions such as Swiggy Money and Swiggy UPI.

IPO Details

• Offer Type: The IPO includes both a Fresh Issue and an Offer for Sale (OFS) of up to 29,04,46,837 shares (?11,327.43 Cr).
• Fresh Issue: Equity shares totalling ?11,53,58,974 shares (?4,499.00 Cr).
• Offer for Sale: 17,50,87,863 shares (?6,828.43 Cr).
• Price Band: ?371 to ?390 per share.
• Lot Size: 38 Shares.
• Listing At: BSE, NSE.
• QIB Shares Offered: Not less than 75% of the Net Issue.
• Retail Shares Offered: Not more than 10% of the Net Issue.
• NII (HNI) Shares Offered: Not more than 15.00% of the Net Issue.
• IPO Open Date: Wednesday, November 6, 2024.
• IPO Close Date: Friday, November 8, 2024.
• Cut-off time for UPI mandate confirmation: 5 PM on November 8, 2024.
• Basis of Allotment: Monday, November 11, 2024.
• Initiation of Refunds: Tuesday, November 12, 2024.
• Credit of Shares to Demat: Tuesday, November 12, 2024.
• Listing Date: Tuesday, November 12, 2024.

Use of IPO Proceeds

Swiggy aims to allocate the IPO funds primarily towards:

• Scootsy Repayments: Invest in its subsidiary, Scootsy, to manage borrowings.
• Dark Store Expansion: Develop dark stores for the Quick Commerce segment, including lease/licensing expenses.
• Technology & Cloud Infrastructure: Enhance tech infrastructure and cloud capacity.
• Brand Marketing: Boost brand visibility across services.
• Inorganic Growth: Support future acquisitions for expanding service capabilities.

Industry Outlook

India's hyperlocal commerce market has shown rapid growth, driven by digitalization and convenience-seeking consumer behaviour. The company leverages India's rising urbanization, income levels, and an expanding working population, creating a robust demand for organized retail and quick delivery services. Swiggy is well-positioned to benefit from these trends as it is one of the pioneering players in this sector, particularly with food delivery and quick commerce.

IPO SWOT Analysis

Strengths

1. Market Leadership in Hyperlocal Commerce: Swiggy is one of the pioneering platforms in India’s hyperlocal commerce sector, particularly excelling in food delivery and quick commerce. The company is well-recognized and has built a robust brand identity synonymous with convenience and accessibility in urban areas.
2. Innovative Service Expansion: Beyond food delivery, Swiggy has strategically expanded into adjacent areas, such as grocery (Instamart), dine-out reservations (Dineout), and package delivery (Genie). These expansions strengthen the company’s integrated service ecosystem.
3. Strong User Engagement: With a significant user base and frequent transactions per month, Swiggy benefits from high customer retention. The platform's "Swiggy One" membership adds to user loyalty by offering discounts across multiple services.
4. Technology-Driven Platform: Swiggy has invested in technology and data analytics to optimize delivery routes, user personalization, and operational efficiency, improving customer experience and partner engagement.

Weaknesses

1. Reliance on Indian Market: Swiggy’s heavy dependence on India makes it vulnerable to changes in the local economy, regulations, and consumer behaviour.
2. Profitability Challenges: Despite significant revenue growth, profitability remains an issue due to high operational costs, including marketing, delivery logistics, and technology investments.
3. Limited Experience in Quick Commerce: While Swiggy is a leader in food delivery, its relatively recent entry into quick commerce may present operational challenges, especially in terms of optimizing dark stores and maintaining service efficiency.

Opportunities

1. Expansion into New Categories: There’s room for Swiggy to explore new high-demand categories, such as health and wellness products, pharmacy delivery, and direct-to-consumer FMCG goods, which could drive higher engagement and revenue.
2. Growing Digital Payment Solutions: With its own in-app payment options like Swiggy Money and Swiggy UPI, the company can capitalize on the expanding digital payments market in India and improve customer retention.
3. Inorganic Growth: The planned use of IPO proceeds for acquisitions allows Swiggy to expand its capabilities and reach by integrating complementary businesses, enhancing its technology, and scaling more rapidly.
4. Untapped Regional Markets: With a strong foothold in urban India, Swiggy has potential growth opportunities in tier-2 and tier-3 cities.

Threats

1. Intense Competition: Swiggy faces competition not only from other food delivery and hyperlocal platforms like Zomato and Dunzo but also from large companies entering the quick commerce and delivery space, which could impact market share and margins.
2. Regulatory Risks: Changes in government policies, such as new labour laws or e-commerce regulations, could affect Swiggy’s delivery model and operational costs.
3. Logistics and Operational Challenges: Efficient delivery across diverse regions remains challenging, especially given external factors like traffic, weather, and the need for a reliable delivery workforce.
4. Evolving Consumer Preferences: As consumer expectations rise, Swiggy must continuously innovate and improve its offerings. Failure to do so could lead to a loss of customer loyalty and transaction frequency.

Financial Performance

Revenue and Income

1. Total Income

FY 2024: ?11,634.35 crore

FY 2023: ?8,714.45 crore

FY 2022: ?6,119.78 crore.

2. Revenue from Operations:

FY 2024: ?11,247.39 crore

FY 2023: ?8,264.60 crore

FY 2022: ?5,704.89 crore.

Expenses

Cost of Materials and Purchases:

FY 2024: ?4,554.75 crore

FY 2023: ?3,301.95 crore

FY 2022: ?2,224.54 crore.

Employee Benefits:

FY 2024: ?2,012.16 crore

FY 2023: ?2,129.82 crore

FY 2022: ?1,708.49 crore.

Profitability and Losses

Net Loss:

• FY 2024: ?2,350.24 crore
• FY 2023: ?4,179.30 crore
• FY 2022: ?3,628.90 crore.

EBITDA Loss:

• FY 2024: ?1,858.25 crore
• FY 2023: ?3,835.32 crore
• FY 2022: ?3,410.43 crore.

Key Ratios:

Basic EPS:

• FY 2024: ?-10.70
• FY 2023: ?-19.33
• FY 2022: ?-18.62.

Return on Net Worth:

• FY 2024: -30.16%
• FY 2023: -46.15%
• FY 2022: -29.58%.

NAV per Share:

• FY 2024: ?35.48
• FY 2023: ?41.88
• FY 2022: ?62.96.

Cash Flow

Operating Cash Outflow:

• FY 2024: ?1,312.74 crore
• FY 2023: ?4,059.90 crore
• FY 2022: ?3,900.39 crore.

Investing Cash Flow:

1. FY 2024: Positive cash flow from investing activities of ?14,584.58 crore, largely attributed to:

• Proceeds from sale/maturity of investments: ?100,122.19 crore.
• Offset by investments: Purchases worth ?82,721.27 crore.
• Capital Expenditure: Purchase of property, plant, equipment, and intangibles totalling ?3,517.14 crore.

2. FY 2023: Positive cash flow of ?39,678.47 crore.

• Sale/maturity of investments: ?138,437.43 crore.
• Investment purchases: ?97,678.69 crore.

3. FY 2022: Significant outflow of ?91,601.40 crore, driven by:

• Investment purchases: ?210,735.66 crore.
• Offset by proceeds: ?118,881.46 crore.

Financing Cash Flow:

1 . FY 2024: Net cash outflow of ?1,227.95 crore.

• Proceeds from borrowings: ?3,976.97 crore.
• Repayment of borrowings: ?2,900.82 crore.
• Lease liability payments: Principal of ?1,636.46 crore.

2. FY 2023: Cash outflow of ?1,715.48 crore.

• Lease principal payments: ?1,450.49 crore.
• Lease interest payments: ?264.99 crore.

3. FY 2022: Significant inflow of ?136,341.48 crore, mainly due to:

• Equity instrument issuances: ?139,055.63 crore.
• Borrowing repayments: ?918.02 crore.

Conclusion of Swiggy vs. Zomato.

1. Market Segments:

• Swiggy operates across food delivery, quick commerce, dine-out reservations, and package pickup/delivery. It provides an all-in-one platform with multiple services under one app.
• Zomato focuses on food delivery and restaurant discovery but also has a growing presence in quick commerce through its acquisition of Blinkit.

2. Order Volume and Growth:

• Swiggy shows robust growth in total orders and unique monthly users across multiple segments, with food delivery as a core service. For FY 2024, Swiggy recorded 213.92 million total B2C orders compared to Zomato's 760.18 million food orders.
• Zomato's high volume in food delivery indicates a strong foothold specifically in this sector, leveraging its long-standing reputation for food services venue and Contribution Margins**:
• Swiggy’s gross revenue from all operations was ?123,203 million in FY 2024, showing consistent multi-segment revenue growth.
• Zomato’s food delivery GOV was higher at ?322,240 million, reflecting a strong hold on delivery volume. Swiggy has a lower GOV in food but a higher average order value (AOV) due to user engagement across services like quick commerce and dine-out.
• Swiggy reported negative EBITDA across services, showing the challenges of achieving profitability while scaling.
• Zomato has improved its food delivery EBITDA, positioning itself ahead of Swiggy in achieving sustainable unit economics in the food delivery segment.

3. Technology and User:

• Swiggy's platform integrates services that maximize user engagement via the Swiggy One membership, driving higher order frequency (7.4 orders per month among members).
• Zomato's focus on food delivery remains dominant, though its expansion with Blinkit indicates a strategic shift toward quick commerce.

In summary, Swiggy’s diversified offer a high-value, convenience-focused ecosystem for users, while Zomato's narrower focus on food delivery has helped it achieve higher profitability in this core area. Both companies are leveraging India’s digital growth, but Zomato's profitability efforts in food delivery may position it favourably in the near term, while Swiggy’s broad, high-engagement services provide a platform for longer-term, multi-segment growth.

For retailers, Swiggy's IPO could be attractive for listing gains due to strong brand appeal and market interest. However, long-term investment carries higher risk given Swiggy's lack of profitability, intense competition, and high operational costs. Short-term investors may benefit from initial demand, while long-term investors should be cautious and monitor profitability progress.

**Disclaimer: This information is for educational and informational purposes only and should not be construed as financial advice. The author is not a SEBI-registered investment advisor, and the opinions expressed here are based on publicly available information and personal analysis. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions. The author and the platform cannot be held responsible for any investment losses or decisions made based on this information.**