Swiggy IPO: All You Need to Know

IPO
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Swiggy IPO: All You Need to Know

As Swiggy prepares for its ₹10,000 crore IPO, investors and stakeholders await details in its Updated Draft Red Herring Prospectus (UDRHP). This IPO will introduce new shares and an OFS to boost Swiggy’s technological and operational growth and position it competitively in the growing delivery market.

Swiggy’s IPO Structure

The Swiggy IPO will include ₹3,750 crore in new shares and an OFS of up to 1.85 crore shares. A recent Extraordinary General Meeting (EGM) considered increasing the amount to ₹5,000 crore. Swiggy now offers Quick Commerce, Dineout, and Genie services in addition to food delivery. The IPO is unique because Swiggy has no primary promoter, with CEO Sriharsha Majety owning 6.23% and co-founder Lakshmi Nandan Reddy Obul 1.62%.

Major Selling Shareholders

Accel India, Apoletto Asia, and Tencent Cloud Europe among institutional investors selling stakes, according to the UDRHP. Some of Swiggy’s co-founders and early backers will sell their shares in the IPO. Kotak Mahindra Capital and Citigroup Global Markets India are the book-running lead managers (BRLMs), and Link Intime India will register the IPO.

IPO Objectives and Fund Utilisation

Swiggy plans to allocate the IPO proceeds across five core objectives, aligning with its future growth strategies:

  • Subsidiary Debt: ₹137.41 crore will reduce debts in Swiggy’s Scootsy subsidiary.
  • Quick Commerce Expansion: ₹982.40 crore will fund Dark Stores, a network of facilities ensuring faster deliveries.
  • Technological Investments: ₹586.20 crore will support tech infrastructure, a backbone for Swiggy’s operational efficiency.
  • Marketing and Branding: Swiggy will use ₹929.50 crore to boost brand presence through campaigns and promotions.

Financial Performance and Comparisons

Swiggy has experienced consistent losses, with the latest loss of ₹2,350.24 crore for FY24, a notable decrease from the prior year’s ₹4,179.30 crore. Revenue climbed from ₹5,704.89 crore in FY22 to ₹11,247.39 crore in FY24. Comparing with Zomato, Swiggy’s FY24 revenue fell slightly short of Zomato’s ₹12,114 crore, although Swiggy’s net asset value (NAV) per share of ₹35.48 exceeds Zomato’s ₹23.14, highlighting a stronger asset position.

Risks and Challenges

Several factors contribute to Swiggy’s risk profile as it works towards profitability:

  • Swiggy must maintain growth and control costs to be profitable.
  • Operational challenges include delivery partner retention and customer growth.
  • Swiggy must raise prices without losing customers due to rising operational costs.
  • Maintaining fast commerce requires managing and scaling Dark Stores.

Legal and Employee Concerns

Swiggy faces ongoing legal proceedings involving its directors and subsidiaries, which may present potential liabilities. Additionally, high employee attrition rates remain a challenge, with attrition reaching 34.56% in FY24.

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Swiggy IPO Set to Open Post-November 6: Valuation Target Adjusted to $11.3 Billion

Swiggy, the food delivery and quick commerce leader, is gearing up for its Initial Public Offering (IPO) with a revised valuation target of $11.3 billion. This adjustment from the initial $15 billion valuation reflects the current volatility in the Indian stock market and aims to encourage greater participation from retail investors.

Swiggy IPO Overview

Swiggy plans to attract over 30 foreign anchor buyers for its IPO after November 6, 2024. This follows Invesco’s last investment’s $10.3 billion private valuation. Swiggy’s lower valuation is a strategic move to attract investors in a tough market, especially given its competition with Zomato, which leads India’s quick-commerce sector.

The IPO will offer ₹3,750 crore in new shares and 18.52 crore shares for sale. Swiggy is considering a pre-IPO funding round, which could change the issuance size. Besides retail investors, the IPO will attract qualified institutional buyers (QIBs), anchor investors, mutual funds, and non-institutional buyers.

Market Conditions Impacting Swiggy’s IPO

The Indian stock market is currently navigating a significant correction due to foreign fund outflows, high valuations, and geopolitical uncertainties. The recent Nifty 50 and Sensex declines have created the longest weekly losing streak in 14 months, which is particularly impactful with Diwali and the Hindu New Year Samvat 2081 approaching. Swiggy’s recalibrated IPO valuation aligns with these market dynamics, aiming to ensure its listing amid the challenging market backdrop.

IPO Process and Lead Managers

Swiggy’s listing process has been guided by several key financial entities, including Kotak Mahindra Capital, Citigroup Global Markets India, Jefferies India, and Avendus Capital as book-running lead managers. Link Intime India serves as the IPO’s registrar. After submitting the offer document under SEBI’s confidential pre-filing process in April, Swiggy received SEBI’s acceptance in September 2024, setting the stage for a November listing.

Swiggy’s Financial Performance

Despite persistent challenges, Swiggy has made strides in improving its financials. The company’s net losses have narrowed significantly, dropping from ₹4,179.30 crore in FY23 to ₹2,350.24 crore by FY24’s end. Revenue also grew robustly, reaching ₹11,247.39 crore from the previous year’s ₹8,264.59 crore, showcasing Swiggy’s commitment to strengthening its operational performance.

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Swiggy Increases IPO Size to $1.3 billion, Set for Largest Offering of 2024

Swiggy is set to raise nearly ₹4,499 crore ($595 million), up from the previously planned ₹3,750 crore, after it received an approval from its shareholders to increase the size of its fresh issue in its upcoming IPO.

The food delivery company’s current shareholders will sell shares worth ₹6,664 crore. With the increase in the fresh issue, the total size of Swiggy’s IPO will rise to $1.3 billion from $1.25 billion. This makes it the largest IPO in India this year, surpassing NTPC Green Energy’s $1.2 billion filing.

The Bengaluru-based company filed its draft IPO papers last week, aiming for a $15 billion valuation. It plans to use the funds to expand its quick-commerce service ‘Instamart’, where it competes with rivals like Zomato and Zepto to deliver groceries and electronics in just 10 minutes. Swiggy also competes with Zomato in food delivery.

Swiggy Business Details

Swiggy, a tech-based food delivery company, allows customers to browse, choose, order, and pay for groceries and household goods through its Instamart service. It also provides food delivery, event booking (SteppinOut), item pickup and drop-off (Genie), and other local services. Its platform connects users with on-demand delivery partners for home delivery of their orders.

The food delivery giant also leads in high-frequency local commerce through innovation. It has a growing user base and increasing engagement. The unified “Swiggy” app offers a smooth experience, making it the top choice for restaurant and merchant partners, brands, and delivery agents. The wide user network creates positive network effects, while a strong leadership team and good governance drive the company’s success.

Swiggy Financials

Swiggy faced continuous financial losses since its founding, though its losses have reduced over time. For the fiscal year ending March 31, 2024, Swiggy’s losses fell to ₹2,350.24 crore, down from ₹4,179.30 crore in FY23 and ₹3,628.89 crore in FY22. During this time, operating revenue rose to ₹11,247.39 crore, compared to ₹8,264.59 crore in FY23 and ₹5,704.89 crore in FY22.

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Swiggy IPO vs Zomato: Pre-IPO Financial Comparison

Swiggy and Zomato are two giants in India’s food delivery industry, each vying for dominance in an increasingly competitive landscape. Zomato is a publicly listed company while Swiggy filed its DRHP with SEBI in September 2024.

Revenue Growth and Market Share

Zomato was founded in 2008 and managed to capture a larger portion of the market with its diverse offerings like restaurant reviews, dine-in services, and food delivery. According to a June 2024 Goldman Sachs report, Zomato holds nearly 56-57% share in the food delivery market. Swiggy has grown quickly since its launch in 2014. It primarily focussed on food delivery and expanded into grocery delivery during the pandemic years.

In FY 2024, Zomato reported a total income of ₹12,961 crore, compared to ₹7,761 crore in FY 2023. Swiggy, in comparison, generated a total income of ₹11,634.34 crore in FY 2024. While Zomato’s revenue is slightly higher, Swiggy has been rapidly closing the gap. However, it is to be noted that the total income of Zomato in FY 2021, that is pre-IPO, was ₹2118.42 crore , which is less than Swiggy’s pre-IPO total income.

Profitability and Losses

Zomato went public in July 2021 and posted a net loss of ₹816.42 crore in FY2021. In FY 2024, Zomato’s profit for the year was ₹351 crore. IPO-bound Swiggy, on the other hand, reported a net loss of ₹2,350.24 crore for FY2024, a decrease from ₹4,179.30 crore in the previous year.

Expansion and Diversification

Swiggy expanded into grocery delivery through Instamart and hyperlocal services like Swiggy Genie, which offers pickup and drop-off services for personal items. This broader focus could give Swiggy an edge in the long run, as it taps into multiple revenue streams. Swiggy also ventured into dining services through its Swiggy Dineout platform, which offers deals and discounts at restaurants.

Zomato focused on building a presence in restaurant listings, reviews, and dine-in services, and is also looking for diversification. In 2022, the company acquired quick-commerce platform Blinkit, entering the instant grocery delivery space.