Swiggy, one of India’s leading food delivery and quick-commerce platforms. The company is set to make its stock market debut with an Initial Public Offering (IPO). Swiggy was founded in 2013, Swiggy has evolved from a food delivery service into a multi-service platform. These days, the company does Instamart for groceries and Genie for on-demand deliveries.
Swiggy has its headquarter in Bengaluru. The company has built a vast network that reaches many consumers across India. Swiggy is supported by a strong base of delivery partners and technology-driven logistics.
The IPO marks a significant step in Swiggy’s journey. The company is now transitioning from a high-growth startup to a publicly traded company. Through this offering, Swiggy aims to raise fresh capital, which it plans to use to drive further growth and reduce debt.
The IPO will include a fresh issue of shares along with an offer for sale (OFS) from existing shareholders.
Given Swiggy’s prominence in India’s expanding digital economy, I think, this IPO is expected to attract considerable interest from retail and institutional investors. As consumer behavior shifts further toward online services, Swiggy’s public debut represents an opportunity for investors. We as people can participate in India’s evolving food delivery and quick-commerce sectors.
Topics
1. Key Details of the IPO
Swiggy’s IPO is set to attract interest from a wide range of investors. It is a well-known brand and also has a growing presence in India’s food delivery and quick-commerce sectors. Here are a few key details of the IPO
- IPO Dates: The IPO will open for subscription on November 6, 2024, and close on November 8, 2024. For Anchor Investors, the bidding opens a day earlier, on November 5, 2024. The allotment is expected to be finalized on November 11, 2024, and Swiggy’s shares are likely to list on the BSE and NSE on November 13, 2024.
- Issue Size: The total issue size amounts to Rs.11,327.43 crore. This comprises a Fresh Issue of approximately 11.54 crore shares totalling Rs.4,499 crore, and an Offer for Sale (OFS) of 17.51 crore shares, aggregating to Rs.6,828.43 crore. The Fresh Issue funds will support Swiggy’s growth initiatives, while the OFS will allow existing shareholders to partially exit.
- Price Band and Lot Size: The IPO price band is set between Rs.371 and Rs.390 per share. The minimum lot size for retail investors is 38 shares, requiring a minimum investment of Rs.14,820. For high net-worth investors (HNIs), the minimum subscription sizes differ:
- S-HNI (small HNI): Minimum of 14 lots (532 shares) amounting to Rs.207,480.
- B-HNI (big HNI): Minimum of 68 lots (2,584 shares), amounting to Rs.1,007,760.
The IPO also includes a reservation of 750,000 shares for employees at a Rs.25 discount per share.
Swiggy’s IPO, structured as a 100% Book Built Issue. It provides retail investors with up to 10% of the total shares. The 75% is reserved for Qualified Institutional Buyers (QIBs), and 15% for Non-Institutional Investors (NIIs).
2.Company Background and Market Position
Swiggy was founded in 2014 by Sriharsha Majety, Nandan Reddy, and Rahul Jaimini.
Swiggy was initially launched as an online food delivery platform in Bengaluru. From its early days, Swiggy focused on establishing a strong logistics network, a strategy that allowed it to differentiate from other players by ensuring faster deliveries and a seamless customer experience.
Swiggy’s rapid expansion across major Indian cities helped it become a household name. It is one of the largest food delivery services in India within a few years.
Over time, Swiggy has diversified its services beyond food delivery, branching into new verticals like grocery delivery and hyperlocal delivery services.
2.1 Current Business Model
Swiggy operates a multi-stream revenue model built around its core services. These revenue streams include:
- Food Delivery: Swiggy’s primary revenue source continues to be food delivery, where the platform connects customers with local restaurants, earning revenue from delivery charges, commissions from restaurants, and service fees.
- Instamart: Launched to meet the demand for quick-commerce, Swiggy’s Instamart offers instant delivery of groceries and household essentials. This segment leverages Swiggy’s extensive logistics network and infrastructure, particularly through “dark stores” (mini-warehouses) strategically located across cities.
- Swiggy Genie: Swiggy’s hyperlocal delivery service, Genie, allows users to send and receive parcels within a city, catering to tasks like picking up forgotten items or delivering packages to friends and family. This has added an additional revenue stream that utilizes the company’s delivery network.
- Dineout and SteppinOut: Swiggy acquired Dineout in 2022, allowing it to offer restaurant reservation services and event ticketing through SteppinOut. This further complements Swiggy’s role in the dining ecosystem.
- Membership and Financial Services: Swiggy offers a membership program, “Swiggy One,” which provides subscribers with discounts across its services. The platform also has payment features like “Swiggy Money” (a digital wallet) and a co-branded credit card in partnership with HDFC Bank, which earn transaction fees and increase user retention.
- Business Solutions for Partners: Swiggy provides analytics tools and fulfillment services for restaurant and merchant partners. It enhances their online presence and optimizes their last-mile delivery.
Through this diversified business model, Swiggy has moved from being purely a food delivery platform to a broad-spectrum hyperlocal service provider.
2.2 Market Position
In the Indian food delivery market, Swiggy is one of the two leading players, competing closely with Zomato.
Swiggy’s competitive edge lies in its wide array of services beyond food delivery, such as Instamart and Genie, which have allowed it to attract a diverse customer base.
While Zomato focuses primarily on food delivery and dining experiences, Swiggy’s extensive reach into quick-commerce and parcel services gives it a broader market appeal.
Swiggy’s efficient delivery network, large fleet of delivery partners, and presence in smaller cities have contributed to its significant market share. This has enabled it to cater to varied customer needs, from daily grocery orders to last-minute restaurant deliveries.
3. Objective of the IPO
Swiggy’s IPO aims to raise capital to support its expansion and strengthen its operational framework. The funds from the fresh issue will be directed towards multiple areas critical for sustaining and accelerating Swiggy’s growth in the highly competitive Indian market:
- Business Expansion: A significant portion of the IPO proceeds will be allocated to expanding Swiggy’s presence across India. This includes reaching new cities, especially Tier II and Tier III locations, where demand for food delivery and quick-commerce is growing rapidly. Expanding its geographical footprint will allow Swiggy to tap into these high-potential markets, diversifying its customer base and increasing market share.
- Investment in Technology and Logistics: Swiggy plans to leverage part of the funds to enhance its technology infrastructure. The focus will be on innovations that improve delivery efficiency and user experience. Investments will also be in logistics technology, such as advanced route optimization and AI-driven demand forecasting. It will help Swiggy streamline operations, reduce costs, and maintain a competitive edge.
- Debt Repayment: The IPO proceeds will also support Swiggy’s balance sheet by reducing existing debt. Lowering debt levels will enable Swiggy to save on interest expenses. It will improve the cash flow, which can then be reinvested into the business.
- Sustainability Initiatives: Swiggy may also invest in sustainable practices, such as eco-friendly packaging solutions and renewable energy usage across its operations. It will be in line with evolving environmental regulations and consumer expectations.
Growth and Innovation
Swiggy’s growth strategy centers on scaling its core services while also exploring innovative solutions to meet changing consumer needs. The key strategic goals are as follows:
- New Product Launches: Swiggy is actively expanding its quick-commerce offerings through Instamart. Future plans may include launching more niche services under the Swiggy brand, catering to hyperlocal demands like event ticketing, micro-shopping, or high-frequency product categories.
- Regional Expansion: Swiggy’s current focus is on deepening its reach in smaller towns and cities across India. Through an expanded network of dark stores, local partnerships, and dedicated delivery fleets, Swiggy aims to make its services accessible to millions of new customers outside major metropolitan areas.
- Entry into New Verticals: Swiggy is exploring growth beyond food and grocery delivery by expanding services like Swiggy Genie. It is a platform for hyperlocal deliveries and personal errands. Swiggy is also growing its presence in out-of-home dining (via Dineout) and event ticketing (through SteppinOut), marking its entry into additional high-growth segments in India’s lifestyle and entertainment sector.
- Enhanced Digital Payments and Financial Products: Swiggy intends to capitalize on the digital payments trend through solutions like Swiggy Money and a co-branded credit card with HDFC Bank. Further development of these products may bring Swiggy closer to creating a robust fintech ecosystem within its app, offering users more convenience and incentives while enhancing customer loyalty.
With these objectives, Swiggy aims to solidify its leadership in India’s food delivery and quick-commerce spaces.
4. How Retail Investors Can Participate
Retail investors looking to invest in Swiggy’s IPO can follow a straightforward application process. Here’s a quick guide on how to get started:
4.1 Application Process for Retail Investors
Retail investors can apply for Swiggy’s IPO using the Application Supported by Blocked Amount (ASBA) method, which is mandatory for all public issues. The ASBA process allows investors to block the application amount in their bank account, ensuring that funds are only debited upon share allotment.
4.1.1 ASBA Process
- Online Application: Investors can apply directly through their bank’s net banking portal or trading platform, selecting the Swiggy IPO from the list of available issues. Many banks and brokerage platforms provide an IPO section where investors can enter details such as the number of shares and bid price.
- Blocking of Funds: Under ASBA, the application amount is temporarily blocked in the investor’s bank account but is not debited. This ensures that funds remain with the investor until the allotment process is complete.
- Final Allotment and Debit: If shares are allotted, the blocked amount is deducted, and the shares are credited to the investor’s Demat account. If no shares are allotted, the blocked amount is released without any deductions.
4.2.2. Offline Application
Investors may also submit a physical ASBA form at a designated branch of their bank. The bank will process the application and block the required funds accordingly.
Investment Options for Different Types of Investors
Swiggy’s IPO offers investment options tailored for different investor categories, each with distinct allotment structures:
- Qualified Institutional Buyers (QIBs): This category includes entities like mutual funds, banks, and insurance companies. QIBs are allotted a minimum of 75% of the total issue size, making this category the largest investor group in the IPO. QIBs bid at the price they are willing to pay, usually with a substantial financial commitment, and are often among the first to receive allotments.
- Non-Institutional Investors (NIIs): Also known as High Net-Worth Individuals (HNIs), NIIs are investors who apply for shares exceeding Rs.2 lakh in value. The NII category is further divided into small HNIs (S-HNIs) and big HNIs (B-HNIs), with different minimum lot requirements:
- S-HNIs: Must apply for a minimum of 14 lots (532 shares), amounting to an investment of approximately Rs.207,480.
- B-HNIs: Must apply for a minimum of 68 lots (2,584 shares), with an investment starting at Rs.1,007,760.
- This category is allotted 15% of the total issue size.
- Retail Individual Investors (RIIs): Retail investors can apply for shares up to a maximum of Rs.2 lakh in value. In Swiggy’s IPO, retail investors are allotted 10% of the total issue size. The minimum lot size for retail investors is 38 shares, requiring an investment of Rs.14,820. Shares are allotted on a proportionate basis in cases of oversubscription.
5. Financial Performance of Swiggy
| In INR Million | March 31, 2024 | March 31, 2023 | March 31, 2022 |
| Balance Sheet | – | – | – |
| PP & E | 4,527.85 | 3,137.49 | 3,115.80 |
| Total current assets | 67,366.28 | 78,226.97 | 1,21,336.30 |
| Total Assets | 1,05,294.21 | 1,12,806.45 | 1,44,057.36 |
| Total equity | 77,914.61 | 90,566.12 | 1,22,669.12 |
| Total current liabilities | 21,068.02 | 17,035.25 | 16,838.47 |
| P&L Account | – | – | – |
| Total Income | 1,16,343.49 | 87,144.53 | 61,197.77 |
| Net Profit (PAT) | -22,559.50 | -41,921.73 | -36,312.28 |
| EPS | -10.7 | -19.33 | -18.62 |
| Cash Flow Report | – | – | – |
| Cash flow from operating activities | -23,502.43 | -41,793.05 | -36,288.96 |
| CAPEX | -82,721.27 | -97,678.69 | -2,10,735.66 |
Based on Swiggy’s financial performance over the last three fiscal years, the company has demonstrated notable growth in total income. Though it is also true that Swiggy faces challenges in profitability and cash flow.
5.1 Revenue and Growth
Swiggy’s revenue trajectory reflects strong growth, with total income increasing from INR 61,197.77 million in FY 2022 to INR 1,16,343.49 million in FY 2024. This upward trend is a positive indicator of Swiggy’s expanding market reach and consumer adoption across its diverse services, particularly food delivery and quick-commerce.
Profitability Challenges
Despite revenue growth, Swiggy continues to face significant losses. The Net Profit (PAT) for FY 2024 stands at -INR 22,559.50 million, a reduction from -INR 41,921.73 million in FY 2023, though it remains a substantial deficit.
Swiggy’s losses have persisted primarily due to high operational costs associated with its business model and continuous investments in expansion and technology.
The Earnings Per Share (EPS) also reflects ongoing losses, with -10.7 in FY 2024, indicating that profitability remains an area for improvement.
Asset and Equity Trends
Swiggy’s total assets have decreased from INR 1,44,057.36 million in FY 2022 to INR 1,05,294.21 million in FY 2024. This decline reflects adjustments in the company’s asset structure, which could be associated with efforts to optimize operational efficiency.
Meanwhile, total equity has decreased, from INR 1,22,669.12 million in FY 2022 to INR 77,914.61 million in FY 2024, indicating an erosion in equity base, potentially due to ongoing losses.
Cash Flow Position
Swiggy’s cash flow from operating activities remains negative, with -INR 23,502.43 million in FY 2024, although this is an improvement from -INR 41,793.05 million in FY 2023.
Negative cash flows from operations suggest that Swiggy is still heavily reliant on external funding to sustain its business activities.
Additionally, Swiggy’s capital expenditures (CAPEX) are substantial, although they show a reduction from INR -2,10,735.66 million in FY 2022 to INR -82,721.27 million in FY 2024.
This high level of CAPEX indicates a continued investment in infrastructure, technology, and market expansion, which aligns with its growth strategy but also strains cash reserves.
Swiggy’s financial performance reflects its position as a high-growth, high-investment company.
While it has achieved impressive revenue growth, profitability remains a challenge, with persistent losses and negative cash flows impacting overall financial health. The IPO funds are expected to support its balance sheet and fund future growth initiatives, making it a potentially attractive but high-risk opportunity for investors.
Swiggy is for investors who are comfortable with a longer investment horizon and path toward potential profitability.
6. Swiggy IPO GMP
The Swiggy IPO has garnered significant attention in the financial markets. It is also partly due to its Grey Market Premium (GMP). The GMP for Swiggy’s shares has been observed to fluctuate in the days leading up to the IPO.
Recent data indicates that the GMP has settled at around 5% over the issue price. It suggest a modest listing gain upon the shares’ debut on the stock exchange.
This level of GMP reflects a cautious optimism among investors. In light of the broader market conditions and Swiggy’s financial performance, which has included losses despite revenue growth, a modest 5% GMP is reasonable.
While Swiggy has a strong presence in the food and grocery delivery sector, its IPO valuation and the interest from institutional investors present a mixed sentiment.
The GMP also hints at reservations about immediate listing gains. This scenario is further complicated by comparisons with competitors like Zomato, where investors might weigh the growth potential against the path to profitability. The comparison will lead to a nuanced approach towards investing in Swiggy’s IPO.
Conclusion
Based on recent analysis, Swiggy’s IPO appears to be a promising opportunity for investors, though it comes with certain considerations.
For those with a long-term view, Swiggy’s growth potential and strategic positioning in India’s quick-commerce and food delivery sectors make it an appealing prospect. The company has been fairly priced compared to its main competitors, making it a competitive offering.
However, potential investors should also be mindful of the challenges Swiggy faces, including profitability pressures, market competition, and its heavy reliance on discounts and advertising to drive growth.
Given these dynamics, this IPO may be more suited for investors comfortable with some risk. As a retail investor, I’ll not keep a high percentage of my funds locked in this IPO. Swiggy IPO is suitable for those who can sustain a long-term investment horizon, but overexposure to such a loos-making company must be avoided.
Have a happy investing.
