Swiggy IPO review and detailed analysis | Swiggy vs Zomato

Summary

Swiggy's IPO, one of the biggest of 2024, raises over ₹11,300 crores, with 40% of proceeds going to the company. The platform operates across five business segments, including food delivery and quick commerce. While Swiggy is showing signs of growth with improved financials and expanding user base, it remains loss-making, with significant competition from Zomato. The IPO's valuation is more attractive than Zomato's, but Swiggy faces risks like intense market competition, regulatory challenges, and dependency on key partners. Investors should weigh the high growth potential against these risks before investing.

Takeaways

• 😀 Swiggy's IPO launched on November 6, 2024, aiming to raise ₹11,327 crores, making it the second-largest IPO of 2024 after Hyundai.
• 😀 The IPO is split into a ₹4,499 crore fresh issue and a ₹6,828 crore offer-for-sale (OFS), with a price band of ₹371-390 per share.
• 😀 Swiggy operates across five business segments: food delivery, dining out and events, quick commerce, B2B supply chain, and platform innovations.
• 😀 Swiggy’s Gross Order Value (GOV) grew by 32% annually from ₹20,000 crore in 2022 to ₹35,000 crore in 2024, signaling robust growth.
• 😀 The company’s food delivery business, which generates the largest share of revenue, has reduced losses from ₹1,400 crore to ₹47 crore.
• 😀 Swiggy's quick commerce (Instamart) and out-of-home consumption businesses are still losing money, with losses increasing year-over-year.
• 😀 The online food delivery market in India is projected to grow at a CAGR of 17-22%, while quick commerce is expected to grow at a staggering 60-80% CAGR by 2028.
• 😀 Swiggy has shown a 38% annual growth in revenues over the last two years, but continues to report losses, though the losses have been reducing.
• 😀 Swiggy faces intense competition, particularly from its main rival Zomato, which is currently more profitable and has a larger market cap.
• 😀 Swiggy's IPO proceeds will primarily fund investments in its subsidiary Scooty, technology, debt repayment, and general corporate purposes.

Q & A

What is the size of Swiggy's IPO, and when does it open and close?

Swiggy's IPO aims to raise ₹11,327 crores, with ₹4,499 crores in fresh issues and ₹6,828 crores in the offer for sale (OFS). The IPO opens on November 6, 2024, and closes on November 8, 2024.

What is the price band for Swiggy's IPO?

The price band for Swiggy's IPO is ₹371 to ₹390 per share.

What are the primary business segments of Swiggy?

Swiggy has five business segments: food delivery, dining out, quick commerce (Instamart), supply chain and distribution (B2B), and new initiatives such as Swiggy Minis and Swiggy One membership.

How has Swiggy's revenue growth been in recent years?

Swiggy's gross revenue has increased from ₹6,900 crores in 2022 to ₹12,300 crores in 2024, reflecting a 34% annual growth rate.

Which of Swiggy's businesses are profitable, and which are loss-making?

Swiggy's food delivery and B2B supply chain businesses are on the path to profitability, with losses reducing. However, the quick commerce (Instamart) and out-of-home consumption (Dout) businesses are still loss-making, though losses have contracted.

How does Swiggy compare to its competitor Zomato in terms of market performance?

Zomato is ahead of Swiggy in terms of market cap, revenue, and profitability. Zomato became profitable in FY24, while Swiggy is still loss-making, although it has reduced its losses.

What are the major risks associated with Swiggy's IPO?

Key risks include Swiggy's ongoing losses, high competition, reliance on third-party partners (such as delivery and restaurant partners), and regulatory risks in its food business. Additionally, Swiggy's material subsidiary, Scooty, has been loss-making.

What is the proportion of fresh issue versus offer for sale (OFS) in Swiggy's IPO?

In Swiggy's IPO, 40% of the funds raised will come from the fresh issue, while 60% will come from the offer for sale (OFS), where existing investors sell their shares.

What will Swiggy use the proceeds from the fresh issue for?

The proceeds from the fresh issue will be used for investment in its material subsidiary, Scooty, technology and cloud infrastructure, marketing, inorganic growth, and general corporate purposes.

What is the outlook for the online food delivery market and Swiggy’s future growth?

The online food delivery market in India is expected to grow significantly by 2028, with a CAGR of 17-22%. Swiggy is positioned well in a fast-growing market, but it faces significant competition from Zomato and other players.