Swiggy is a new-age, consumer-first technology company offering users an easy-to-use convenience platform, accessible through a unified app - to browse, select, order and pay for food “Food Delivery", grocery and household items “Instamart”, and have their orders delivered to their doorstep through its on-demand delivery partner network.

Its platform can be used to make restaurant reservations “Dineout”and for events bookings “SteppinOut”, avail product pick-up/ drop-off services “Genie” and engage in other hyperlocal commerce (Swiggy Minis, among others) activities. Being among the first hyper local commerce platforms, Swiggy has successfully pioneered the industry in India, launching Food Delivery in 2014

and Quick Commerce in 2020.

Swiggy augments the value proposition to users through its membership programme called “Swiggy One” providing discounts and offers; in-app payment solutions like digital wallet “Swiggy Money” (a pre-paid payments instrument), “Swiggy UPI”, and Swiggy-HDFC Bank credit card for additional benefits. It offers comprehensive business enablement solutions to restaurant partners, merchant partners (that sell grocery and household items on its platform) and brand partners including its alliance partners such as analytics-backed tools to enhance their online presence and user base; fulfillment services for streamlining their supply chain operations; and last-mile delivery.

Swiggy is unique, as it is the only unified app in India that fulfils through its own platform all food and related missions of urban users of ordering-in, eating-out and cooking-at-home. According to the Kantar BrandZ Most Valuable Indian Brands Report 2024, Swiggy is the most valuable brand in the consumer technology & services platforms category and is among the top 25 most valuable brands in India overall.

Swiggy operates in five segments namely i) food delivery-present in 681 cities; ii) Out-of-home consumption, covering dining out and events present in 52 cities; (iii) quick commerce covering on-demand delivery of grocery and household items-present in 32 cities, (iv) supply chain and distribution covering business-to-business (B2B) supplies, warehousing, logistics and distribution for wholesalers and retailers, and (v) platform innovations covering its new initiatives and offerings, such as Swiggy Genie, Swiggy Minis, among others-present in 69 cities.

Swiggy collects payments from users for transactions completed on its platform, which typically includes the cost of the food or product purchased, delivery fees and other fees. It then facilitates the transfer of the cost of food or product and delivery related fees to its partners at regular intervals after retaining certain fees.

Object of the offer

The IPO consists of a fresh issue of Rs 4499 crore and an offer-for-sale(OFS) of up to 17,50,87,863 shares by its existing shareholders. Those selling shares in the OFS are Accel India IV (Mauritius) Ltd, Apoletto Asia Ltd, Alpha Wave Ventures LP, Coatue PE Asia XI LLC, DST EuroAsia V BV, Elevation Capital V Ltd, Inspired Elite Investments Ltd, MIH India Food Holdings BV, Norwest Venture Partners VII-A Mauritius, and Tencent Cloud Europe BV.

Out of the proceeds from the fresh issue, Rs 164.8 crore will be used for debt repayment of subsidiary Scootsy. Further Rs 1178.7 crore will be invested in Scootsy to expand the dark store network in the quick commerce segment, with Rs 755.4 crore allocated for setting up dark stores and Rs 423.30 crore for lease or license payments. The company will also invest Rs 703.4 crore in technology and cloud infrastructure, Rs 1115.30 crore for brand marketing and business promotion, and the balance funds will be allocated for inorganic growth and general corporate purposes.

Strengths

Swiggy’s innovation-led approach operates as a self-reinforcing ecosystem where its offerings help it drive interactions with users, and consequently enhances value for all ecosystem participants and the overall platform.

Swiggy’s unified app, growing offerings and wide network of partners drive greater selection and faster delivery times, all of which enhance user experience on its platform and encourages more users to transact with it. As a result, the company has witnessed a consistent growth in its base of monthly transacting users(MTU), both for food delivery and quick commerce individually, as well as for the overall platform. As on June 30, 2024, in its 10 th year of operations, it has reached a milestone of 112.73 million users that have transacted on its platform.

Its customer focused approach to developing its platform across offerings, habit formation due to the seamless user experience, and increasing propensity of users to pay for convenience continues to drive higher engagement and user stickiness on its platform.

Swiggy is unique as the only unified app in India that fulfils through its own platform all food-related missions of urban users of ordering-in, eating-out and cooking-at-home, as of June 30, 2024, and captures the largest share of consumer wallet in terms of Monthly gross order value (GOV) per MTU in the hyperlocal commerce use-cases.

The combined effects of its brand recognition, unified app approach and high frequency offerings helps the company increase user engagement across multiple offerings on its platform, ensures user stickiness, and enables the quick introduction of adjacent and new offerings cost-effectively. This also creates an opportunity for the company to cross-sell its offerings which serves as an attractive tool for user acquisition at low costs and also allows its partners to cross-promote their products across the various offerings its has.

Swiggy’s scale, unified app approach with adjacent categories, engaged user base, and on-demand delivery network creates meaningful opportunities for restaurant partners, merchant partners and brand partners to engage with the company’s user base at low incremental costs.

Swiggy is led by a team of dynamic entrepreneurs and experienced professional management, with industry expertise. It has an eight-member strong leadership team, many of whom come with deep backgrounds in the consumer technology and hyperlocal commerce sectors; and have an aggregate 52 years of experience with Swiggy.

Weaknesses

The company is yet to turn profitable at both operating and at net levels. Further, the company has negative working capital from operations since inception.

If the company fails to retain its existing user base or fail to acquire new users in a cost effective manner, its financial condition will be impacted.

Attracting and retaining delivery partners is critical to the company’s business, and failure to do so in a cost-effective way may have an adverse effect on its business.

Operations of the company will be impacted if the company fails to retain its existing or acquire additional restaurant partners, merchant partners and brand partners in a cost-effective manner. Further, if partners on its platform try to pass on increased operating costs to users, users may decrease the frequency with which they interact on the company’s platform and order volumes on its platform may decline.

Managing the company’s darks stores is critical to its quick commerce business; similarly managing its ware house is critical for supply chain and distribution business and failure to do so in a cost-effective way may have an adverse effect on the company’s business.

The company faces intense competition across the markets it serves.

The uninterrupted functioning of its technology platform is essential to its business. Systems failures and resulting interruptions in the availability of its website, mobile application or platform could adversely affect the company’s operations.

Any actual or perceived cybersecurity, data or privacy breach could interrupt the company’s operations

There are legal proceedings against the company and its subsidiaries aggregating Rs 396.61 crore.

Valuation

For the three months ended June 2024, consolidated sales were up by 34.88% to Rs 3222.2 crore. However, net loss widened to Rs 611 crore from a loss of Rs 564 crore in the same period of the previous fiscal year.

For FY 2024, consolidated sales were up by 36.1% to Rs 11247.39 crore. The Operating loss decreased by 48.4% to Rs 2208.01crore. OI decreased 14.0% to Rs 386.96 crore. Interest costs rose 22.7% to Rs 71.40 crore. Depreciation increased 47.2% to Rs 420.59 crore. Loss before exceptional items declined by 44.4% to Rs 2319.65 crore in FY2024 as against loss before exceptional items of Rs 4170.05 crore in FY2023. Net loss narrowed to Rs 2350.2 crore as against net loss of Rs 4179.31 crore in FY2023.

As the company is making losses, the P/E ratio cannot be calculated. At the higher price band of Rs 390, the offer is made at around 6.94 times post-IPO EV/TTM Sales.

Listed industry peers of the company are Zomato. In comparison, Zomato trades at Price/TTM EPS of 292.9 X, EV/TTM EBITDA of 387X and EV/TTM Sales of 13.2X.

Swiggy will strategically leverage the proceeds from its IPO to narrow the gap in market share with Zomato by expanding its services into new segments and cities. Swiggy will also accelerate Instamart to compete more strongly with Blinkit in quick commerce which will be done by expanding its network of dark stores, optimizing logistics for faster delivery, increasing its product range, and enhancing customer engagement through strategic partnerships and technology integration.