Summary
Swiggy, one of India’s largest online food delivery platforms, is set to launch its much-anticipated Initial Public Offering (IPO). This article delves into Swiggy’s journey, its business model, and the crucial financial details surrounding the IPO. We explore Swiggy’s 10-minute delivery controversy, examine the pros and cons of investing, compare it to competitors, and discuss Swiggy’s place in India’s changing economy. This is not investment advice, just a comprehensive look to help you make informed decisions.
Latest update
As of October 31, 2024, Swiggy has finalized the price band for its upcoming IPO at ₹371 to ₹390 per share. The IPO, expected to raise around ₹11,327.43 crore through a combination of fresh issues (₹4,499 crore) and an offer for sale (OFS) by existing shareholders (₹6,828.43 crore), is one of the year’s largest in India. This offering is set to open for bidding from November 6 to November 8, 2024, with shares likely to be listed on the BSE and NSE by November 13, 2024.
Swiggy’s IPO supports its mission to enhance its core business operations and accelerate expansion across its verticals, including Instamart (quick-commerce grocery delivery), Swiggy Genie (parcel services), and Swiggy Dineout (restaurant reservations and offers). The funds will also bolster Swiggy’s investments in technology.
In terms of investment, Swiggy's growth trajectory and diversified services are promising; however, the IPO’s success will depend on investor reception and valuation alignment. Notably, Swiggy operates in a highly competitive market with key rivals like Zomato and emerging grocery delivery players. Potential investors should review Swiggy's financial details and the competitive landscape to assess its profitability prospects and market position
What is the Swiggy India story?
Swiggy, a name synonymous with food delivery in India, started in 2014 as a simple solution to connect people with restaurants. Headquartered in Bengaluru, it was founded by Sriharsha Majety, Nandan Reddy, and Rahul Jaimini. The idea came from the founders’ frustration with the inefficiencies of existing delivery systems. They wanted to create a seamless, user-friendly app that could simplify the entire food ordering process.
In less than a decade, Swiggy went from a niche startup to a household name, delivering not just food but groceries, essentials, and even employing its own network of cloud kitchens. Its rise coincided with the growing demand for convenience, as more Indians embraced the digital economy. Swiggy’s latest valuation ahead of the IPO has been adjusted to $13.3 billion.
What are the key dates to remember for the Swiggy IPO?
The final dates for the Swiggy IPO haven’t been officially released, but based on insider reports, it is expected to be launched in early 2024. Here are some key steps you should look out for:
- IPO Filing Date: Expected in January 2024
- IPO Opening Date: November 2024
- IPO Closing Date: 3 days after opening (TBC)
- Allotment Date: Shortly after closing
- Listing Date: Within a week post-allotment on both NSE and BSE
Keep an eye on Swiggy’s filings and announcements through trusted financial news outlets to stay updated.
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What are the financials of the IPO?
The Swiggy IPO aims to raise ₹10,414 crore (approximately $1.25 billion). This includes a fresh issue of ₹3,750 crore and an offer for sale (OFS) by existing shareholders.
The official price band is anticipated to be in the range of ₹750 to ₹900 per share.
The Book Running Lead Managers include firms like Kotak Mahindra Capital, Citigroup Global Markets, Jefferies, and Avendus Capita. It’s essential to watch for the final price determination once the IPO is officially registered.
Does Swiggy pay dividends?
As Swiggy remains unprofitable, it has not paid any dividends. This is expected for high-growth startups focusing on reinvestment.
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What products and services does Swiggy offer?
Swiggy has evolved far beyond just food delivery. Today, it boasts multiple business verticals:
Food Delivery: The core business that Swiggy started with. Over 2 lakh restaurants are listed on Swiggy, serving millions of orders daily.
Instamart: Swiggy’s grocery delivery service has gained massive popularity, especially in metro cities. This service is now one of its most robust revenue generators.
Swiggy Genie: Launched as a personal errand service, allowing users to send items across the city.
Swiggy Access (Cloud Kitchens): Swiggy operates its cloud kitchens, a move designed to help restaurants expand their footprint without heavy investment in infrastructure.
Dineout: Helps you in reserving tables in restaurants. Swiggy Dineout is one of Swiggy’s expanding business verticals, focusing on dining-out experiences rather than delivery. Acquired by Swiggy from Times Internet in 2022, Dineout allows users to book restaurant tables, discover deals, and enjoy discounts on dining in restaurants across India. This move is part of Swiggy's strategy to diversify beyond food delivery and venture into the broader food services market.
Each of these verticals has seen different growth levels, with food delivery and Instamart being the most profitable segments. Swiggy's push into groceries has diversified its offerings and solidified its hold on the delivery market.
What is the IPO price band?
The Swiggy IPO price band is expected to be between ₹750 to ₹900 per share, though the final figure will be confirmed closer to the launch date.
What’s the minimum lot size?
Investors can expect a minimum lot size of around 16-20 shares, meaning the smallest investment would be in the range of ₹12,000 to ₹18,000, depending on the final IPO price. For retail investors, this is an affordable range and could attract substantial interest.
Do we really need delivery apps, or is it just convenience?
Let us be real here. Do we need Swiggy or any other delivery app? Probably not in the strictest sense of the word. But do they make life incredibly convenient? Absolutely. Apps like Swiggy cater to our fast-paced lifestyles, where people are balancing work, family, and leisure with limited time.
Of course, one could argue that these apps encourage laziness, but I’d say they cater to modern-day demands. After all, when was the last time you cooked every meal for an entire week?
What is Swiggy’s market share in India?
Swiggy, along with Zomato, dominates the food delivery industry in India, with both companies together holding around 90% of the market. Swiggy commands an estimated 45% of the market, with Zomato trailing slightly behind.
Swiggy’s growth has been attributed to its efficient logistics, a wide variety of restaurants, and a superior user interface that keeps customers returning for more. This substantial market share strengthens the confidence of potential investors eyeing its IPO.
What are the top IPOs of 2024 with the best returns?
While Swiggy’s IPO is the most highly anticipated, here are five IPOs in 2024 that have yielded impressive returns for investors- Vibhor Steel Tubes Ltd: With an issue price of ₹151, it saw 192.72% listing gains. This IPO was listed in February 2024, marking one of the year's top returns
- BLS E-Services Ltd: Issued at ₹135, this company recorded a 174.63% gain on its listing day
- Bajaj Housing Finance Ltd: Priced at ₹70, Bajaj Housing Finance delivered a 135.7% return
- KRN Heat Exchanger Ltd: Listed at ₹220, this IPO offered 117.48% gains on the listing date
- Premier Energies Ltd: At an issue price of ₹450, Premier Energies provided 86.59% returns
How does Swiggy’s IPO compare to its competitors?
When comparing Swiggy’s IPO to competitors like Zomato, it’s essential to look at metrics like profitability, revenue growth, and market penetration. Zomato, which went public in 2021, has faced challenges due to fluctuating stock prices, which could give some investors pause when considering Swiggy.
However, Swiggy has seen better user retention rates and higher order values compared to its main rival.
What are the positives and negatives of Swiggy’s IPO?
Positives:
- Market Leader: Swiggy holds a significant share of the Indian food delivery market.
- Diversified Business Model: Beyond food delivery, Swiggy’s ventures into groceries and personal errands add revenue streams.
- Rapid Growth: Swiggy has consistently shown growth in revenue and users over the years.
Negatives:
- Profitability Issues: Like many tech companies, Swiggy is still not profitable and relies heavily on external funding.
- High Competition: Swiggy faces stiff competition from Zomato, Dunzo, and other emerging players.
- Market Volatility: The Indian market can be volatile, especially for tech-based stocks.
Should you invest in Swiggy’s IPO?
Before investing in any IPO, it’s crucial to go through the Draft Red Herring Prospectus (DHRP) carefully. The DHRP provides vital insights into the company’s financials, business risks, and growth potential.
This article is not a recommendation to apply or not apply to the Swiggy IPO. It’s always advisable to consult with a financial advisor and make an informed choice.
How does taxation work with Swiggy’s IPO?
For retail investors, capital gains tax applies when selling shares. If you hold the shares for less than a year, short-term capital gains tax is levied at 15%. If held for over a year, long-term capital gains over ₹1 lakh attract a 10% tax without the benefit of indexation.
What does Swiggy’s financial analysis reveal?
Swiggy’s latest financial statements reflect both the promise and the challenge of the business:
- Revenue Growth: For FY24, Swiggy’s revenue was ₹11,247 crore, reflecting a 36% YoY growth
- Cash Reserves: Swiggy has reserves of approximately ₹2,500 crore, providing a buffer for expansion.
- Return on Equity (ROE): A moderate 10%, which is low but expected for a high-growth company.
- Return on Capital Employed (ROCE): Around 8%, which, while not stellar, reflects the capital-intensive nature of the business.
- Profitability: Losses have reduced significantly from ₹4,179 crore in FY23 to ₹2,350 crore in FY24, marking a 44% improvement.
Who are Swiggy’s promoters and key management?
Swiggy’s leadership team has been a key driver of its success. The company was co-founded by Sriharsha Majety, Nandan Reddy, and Rahul Jaimini. Majety serves as the CEO, leading the company’s growth and strategy.
Swiggy’s CEO and co-founder, Sriharsha Majety, holds a 6.23% stake, while co-founder Lakshmi Nandan Reddy holds 1.62%
What about Swiggy’s investors and funding timeline?
Swiggy has raised over $2.5 billion in funding over multiple rounds from investors like SoftBank, Prosus Ventures, and Accel. These funding rounds have valued Swiggy at approximately $10.7 billion, making it one of India’s most valuable startups.
Here’s a brief timeline:
- Seed Funding: 2014 – Raised $2 million.
- Series A: 2015 – $16 million led by Accel.
- Series E: 2018 – $210 million led by Naspers.
- Latest Round: 2022 – $700 million from investors like SoftBank.
How does the Indian economy impact the IPO?
Swiggy’s IPO comes at an interesting time for the Indian economy. With inflation under control and the middle class expanding, more disposable income is available for services like food delivery. However, economic slowdowns or regulatory changes can impact Swiggy’s growth trajectory.
What is Swiggy One? Will it have any impact on future prospects of the company?
This service plays a significant role in increasing customer retention by bundling multiple services into a single package. The idea is to give subscribers a reason to stick with Swiggy for a variety of needs, ranging from food and grocery delivery to table reservations at restaurants. It’s a strategy designed to build long-term customer loyalty and encourage higher-frequency usage across multiple Swiggy verticals.
In terms of its impact on Swiggy’s future, Swiggy One is a crucial component of Swiggy’s business model as it diversifies revenue streams beyond commissions from restaurants or delivery fees. By enhancing customer value through a subscription model, Swiggy can generate a steady and predictable source of income. Moreover, subscription services can foster brand loyalty in a highly competitive market where consumers may otherwise switch between platforms like Zomato or Amazon for delivery services.
What is the 10-minute delivery debate about?
Swiggy recently introduced the concept of 10-minute delivery, which instantly became a topic of heated debate. While it sounds like an innovation straight out of a futuristic movie, it raises serious concerns. Is it even possible to deliver food safely and efficiently within 10 minutes? Critics argue that it could lead to accidents, overworked delivery personnel, and an unnecessary push for speed in an already competitive market.
Swiggy defends the model by saying that the concept is not about rushing orders but about pre-emptively preparing popular dishes based on historical data. It’s about optimizing routes and strategically placing cloud kitchens near high-demand areas.
Will the 10-minute delivery be a game-changer or a logistical nightmare? Only time will tell. What are your thoughts? Share in the comments below.
Motilal Oswal's View on the Swiggy IPO
"Swiggy operates in a oligopoly market which is at a nascent stage, thus providing enough opportunities for players to create their niche. Swiggy’s innovation DNA is key to success and it could again be at the forefront through its new 10-minute food delivery offering. However, given that the company is still loss making at an aggregate level, and overall profitability may be some time away, we recommend only High Risk investors to ‘Subscribe for long term’. At the upper price band of ₹390, the issue is priced at 7.8x FY24 Market Cap to Sales and looks reasonably priced compared to Zomato which is trading at 17.5x."
Conclusion
Swiggy’s IPO is shaping up to be one of the exciting events in India’s financial calendar. The company has proven its ability to scale and hold a dominant position in the food delivery space. But with growth comes risks. As an investor, it’s essential to weigh the pros and cons and read the DHRP before making a decision.
FAQs
What is Swiggy’s expected IPO price band?
The expected price band for Swiggy’s IPO is ₹750 to ₹900 per share.
What is the minimum lot size for Swiggy’s IPO?
The minimum lot size is anticipated to be around 16-20 shares.
Does Swiggy offer dividends?
Swiggy has not issued dividends as of yet, given its current growth phase.
Who are Swiggy’s key competitors?
Swiggy’s main competitors include Zomato, Dunzo, and Amazon’s fledgling food delivery service.
Is Swiggy profitable?
Swiggy is not yet profitable, as it continues to focus on aggressive expansion and market capture.
Tushar Mangl writes on business, finance, mental health, food, leisure, and a greener, better society. Speaker, author of Hey Honey Bunch, Ardika, and I Will Do It.
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