The much-awaited Swiggy IPO has recently increased its IPO size from Rs. 3,750 crores to Rs. 5,000 crores in Fresh Issue with shareholder’s approval. The company’s total initial issue size was Rs. 10,414 crore and now it increased to Rs. 11,664 crore. It includes an offer for sale of Rs. 6,664 crore. The increased size of fresh issues shows the competitiveness of the market. This enables extra funds for the company to invest in growth segments.
The company is into food delivery business, grocery and household items (Instamart), dineout services (Dineout), event bookings (SteppinOut), and pickup-drop services (Genie) through their application for the customers to engage in the services. They even have Swiggy minis to operate in the hyperlocal commerce segment. To increase their brand value and to retain customers they have Swiggy One which offers a membership program to use discounts and offers for orders.
Increasing Demand in Quick Commerce Businesses
Swiggy has entered this segment through Swiggy Instamart, which delivers groceries 10 minutes after ordering. Even its rival Zomato has Blinkit which holds a market share of around 45% compared to 27% of Instamart. Their near rival Zepto holds 21%.
This segment is getting heated up and even Tata’s Bigbasket is also into the race. Now, Walmart-backed Flipkart has also launched Flipkart Minutes which is into instant deliveries.
According to Statista, This space is projected to grow at a CAGR of 24.33% from 2024 to 2029. Quick commerce can grow at a higher rate than e-commerce in GMV terms. Recently, these segments are also delivering non-grocery items which is adding more competition into the e-commerce space.
In the object of the offer, the company is looking to invest in expanding the Dark Stores network and for the lease payments. Over the years they are looking to spend around Rs. 982.40 crores from FY25 to FY28.
Through their subsidiary, Scootsy Logistics they are operating 581 open Dark Stores on lease or leave license agreements with a lock-in period ranging from 6 to 12 months.
Swiggy has even introduced Bolt which focuses on delivering food in 10 minutes. The food selection is focused on dishes like beverages, burgers, biriyani, and breakfast items which require minimal preparation time. With these kinds of initiatives, Quick Commerce is trying to change the landscape of the delivery business as well as customer choices.
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Financial Outlook Of Swiggy
Swiggy, in their recently released DRHP, reported their FY24 revenue of Rs. 11,247.39 crore, a 36% increase YoY from Rs. 8,264.59 crore as of FY23. Net losses of FY24 and FY23 were Rs. 2,350.24 crore and Rs. 4,179.30 crore respectively. They have reduced their losses by 43% YoY. Their rival Zomato had reported revenue and net profit of Rs. 12,114 crore and Rs. 351 crore in FY24. Compared to Zomato, Swiggy is yet to be profitable.
The expenses are also increasing with revenues. Their major expenses include stock purchases, employee expenses, delivery charges, and Advertising expenses.
Food Delivery makes up 46% of the topline, Supply chain, and distribution contributes 42.37%, Quick commerce’s contribution is around 8.67% and the remaining 2.91% is from out-of-home consumption and platform innovations in FY24.
The Gross Order Value is around Rs. 35,000 crore including Food Delivery, out-of-home consumption, and Quick commerce in FY24. The average order value of Food Delivery was Rs. 428, a 2.88% YoY, and Quick commerce was Rs. 460, a 15.575 YoY in FY24.
The number of orders from Food Delivery stood at 577.74 million orders, an 11.77% YoY increase, and the Quick commerce segment contributed around 175.46 million orders, a 36.56% YoY increase in FY24.
Investors and it’s previous fundings
In the IPO, some individual shareholders are selling their stakes. Some of the prominent investors include co-founder Sriharsha Majety, P.R. Venketrama Raja (Ramco Systems chairman), co-founder Lakshmi Nandan Reddy, non-executive director Samina Hamied, and former co-founder Rahul Jaimini.
Other key backers like Coatue, Apoletto, Norwest, DST Euro Asia, and Inspired Elite Investments are also likely to join individual shareholders to sell stakes from their holdings. There have been reports from various news media outlets about Bollywood celebrities and athletes being invested in Swiggy.
According to Traxcn, Swiggy has raised funds of around $3.62 billion in 15 rounds, with more than 50 investors and a few angel investors involved, according to Tracxn. The company raised $700 million in 2022 led by Invesco Mutual Fund and others with a valuation of $10.1 billion. Since then, the valuation has fluctuated, and now looking for around $13.3 billion in its IPO.
Despite the high competition, the demand for the delivery business looks brighter. The recent IPO size increase shows the aggressive spending to acquire market share. It all matters to profitability in the long run. The increased competition might increase spending on operations and expansion. However, the execution and new services can help companies to sustain the competition. What do you think about Swiggy’s ambitions? Can they increase their market share? Let us know your views in the comments section below.
Written by Santhosh
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