Swiggy IPO Gets Bigger: Everything You Need to Know About the Rs 50 Billion Public Offer

The current market climate presents a golden opportunity for companies to go public, a sentiment clearly reflected in the offer documents filed with the market regulator.

Last month, 19 companies filed their draft red herring prospectus (DRHP)-the highest number since September 2021.

Since July, more than three dozen companies across various sectors have joined the IPO frenzy, driven by a buoyant market characterised by high subscription levels and impressive post-listing performances.

In the 2024-25 financial year so far, IPOs have been oversubscribed by an average of 48 times, with a remarkable average gain of 35% on listing. This strong momentum is prompting many companies to seize the opportunity and launch their IPOs, leading to a surge in filings.

In the first eight months of 2024 alone, 50 IPOs raised Rs 534.5 billion (bn).

A notable update is the upcoming IPO of food tech giant Swiggy.

In April, Swiggy had confidentially filed its IPO papers for Rs 104 bn (approximately US$ 1.3 bn).

With 16-17 million (m) daily transactional customers, Swiggy has a market share of around 45% of the Indian food delivery business as of March 2024.

The primary objectives of Swiggy's Initial Public Offering (IPO) are to raise a significant amount of money to support the company's expansion strategies and broaden its service offerings beyond food delivery.

If Swiggy's IPO goes forward as planned, it will also become one of the biggest-ever public listings in India.

IPO Size

Swiggy is making waves with its upcoming initial public offering (IPO), and the latest news shows the company is significantly ramping up its plans.

Originally, Swiggy had set out to raise Rs 66.6 bn through an offer-for-sale and Rs 37.5 bn via a fresh issue of shares. But the food tech giant has now decided to push the envelope further.

On 10 September, Swiggy announced it would issue fresh shares worth Rs 50 bn an impressive Rs 12.5 bn more than initially planned.

This means the total IPO value is set to soar to approximately US$ 1.4 bn, up from the earlier US$ 1.3 bn estimate. An additional US$ 150 m will be raised through this new issuance.

This move is set to make Swiggy's IPO one of the biggest public market debuts in recent times.

With the board scheduled to finalise these changes at an extraordinary general meeting (EGM) on 3 October, the stage is set for a blockbuster IPO that could shake up the market.

Peer Comparison: Swiggy vs Zomato

Swiggy and Zomato are the two titans in India's food delivery and quick commerce markets.

While Swiggy takes on Gurgaon-based Zomato in the food delivery arena, its quick commerce vertical, Instamart, faces stiff competition from Zomato-owned Blinkit, Zepto, Flipkart Minutes, and Tata Digital's BigBasket.

• Market Share

  In July, Zomato's market share surged to approximately 29%, more than double Swiggy's 11% growth during the same period. This significant market expansion highlights Zomato's stronger position in the food delivery space.

• Financial Performance

  Comparing the financials of Swiggy and Zomato highlights a clear divergence in their business performance and profitability.

  • #1 Zomato's Financial Strength:

    Zomato has consistently demonstrated strong financial performance. In its Q1 FY25 results, Zomato reported an impressive net profit of Rs 2.5 bn.

    This is a remarkable turnaround from the mere Rs 20 m profit recorded in the same quarter of the previous year. The company's revenue has also seen a substantial increase, reaching Rs 42.1 bn, which is more than double the Rs 14.2 bn reported last year.

    This growth underscores Zomato's robust operational efficiency and its ability to scale its business effectively.

  • #2 Swiggy's Financial Position:

    On the other hand, Swiggy's financials present a more complex picture. For FY24, Swiggy reported a revenue of Rs 112.5 bn, which is slightly lower than Zomato's Rs 121.1 bn.

    However, Swiggy faced a significant net loss of Rs 23.5 bn, a stark contrast to Zomato's profitability. Despite this, Swiggy has made notable progress in reducing its losses, achieving a 44% reduction compared to the previous year.

    This improvement is largely attributed to the success of its Instamart quick commerce platform, which has been a key driver of its growth and operational efficiency.

    Overall, while Zomato's financials reflect a strong and consistent profitability trajectory, Swiggy is showing signs of recovery and strategic progress, particularly through its expanding quick commerce operations.

    The upcoming IPO for Swiggy is poised to capitalise on this growth momentum, positioning itself as a significant player in the evolving market landscape.

Swiggy's IPO Timing Challenge

Swiggy's upcoming IPO arrives at a time when Zomato's stock has surged over 67% in the last six months, making it one of the hottest stocks in India.

Zomato's consistent profitability for five consecutive quarters has bolstered investor confidence.

Swiggy, on the other hand, has yet to achieve consolidated profitability as of the last financial year, highlighting the ongoing challenge it faces.

Big Names on Investor List

Ahead of Swiggy's highly anticipated IPO, several secondary transactions have taken place, bringing prominent new investors on board.

On 28 August, a media report reported that Bollywood legend Amitabh Bachchan's family office had acquired a small stake in Swiggy by purchasing shares from the company's employees and early investors.

Other notable names joining the capitalisation table include Raamdeo Agrawal, chairman of Motilal Oswal Financial Services, and automobile materials manufacturer Hindustan Composites.

Swiggy's existing global investors are also major players, with Prosus, Accel, SoftBank, and Invesco among them. Prosus, which holds a 33% stake, is expected to sell a significant portion of its shares during the offer-for-sale phase of the IPO.

Instamart Expansion

Swiggy on 10 September 2024, expanded its reach and brought its total operational cities to 43. In the last two months, Swiggy launched Instamart in 11 Indian cities-Thrissur, Mangalore, Kanpur, Udaipur, Warangal, Salem, Amritsar, Bhopal, Varanasi, Ludhiana, and Rajkot.

The company is also partnering with local brands and vendors to provide customers access to products based on their regional preferences such as Narans Foods and Ideal Ice cream in Mangalore, Top N Town Breads and Andaah in Bhopal, and Milma Milk and Navua Bakers in Thrissur.

Swiggy Instamart also plans to deepen its presence in Tier II and III markets by expanding its dark store network across existing and new cities and increasing its assortment to handle the rising demand.

Last week, Swiggy launched an Incognito Mode feature, allowing users to place private orders across its food and Instamart platform.

Conclusion

In India, with roughly over 600 m internet users and 185 m online shoppers, the country has the third-largest digital shopping base after the United States and China.

India's D2C market is expected to grow at an exponential rate of 30-40% CAGR over the next few years.

The pandemic has surged the amalgamation of offline and online shopping. Brands are now integrating with online sales channels to ensure a seamless shopping experience for customers.

The expected growth in the market would be aided by macroeconomic factors like the growth in per capita earnings as well as trends like an explosion in the variety of brands and the increasing focus on personalisation.

These industry trends are set to enhance sector performance, with Swiggy positioned to benefit from these favourable developments.

With many exciting players emerging, it's a fantastic time to explore your options in this space.

Be sure to conduct thorough research before making any investment decisions. Ensure the investment aligns with your financial objectives and matches your risk tolerance.

For more information on IPOs, check out the list of upcoming IPOs.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...