Swiggy IPO

Swiggy Company Background

Swiggy is a new-age, consumer-first technology company offering users an easy-to-use convenience platform, - to browse, select, order and pay for food (food delivery business), grocery and household items (‘Instamart’) through a unified app, and have their orders delivered to their doorstep through the company’s on-demand delivery partner network.

Swiggy IPO Risk Factors

• The company has incurred net losses in each year since incorporation and has negative cash flows from operations. If they are unable to generate adequate revenue growth and manage their expenses and cash flows, they may continue to incur significant losses.

• Attracting and retaining delivery partners is critical to their business, and failure to do so in a cost-effective way may have an adverse effect on their business, financial condition and results of operations.

• If they fail to retain their existing or acquire additional restaurant partners, merchant partners and brand partners in a cost-effective manner, their business can be affected. Further, if partners on their platform try to pass on increased operating costs to users, users may decrease the frequency with which they interact on our platform and order volumes on the platform may decline.

Swiggy Company Business Model:

The company earns revenue from sale of services and sale of goods on our platform. Their revenue from services primarily includes,

• Commissions that they charge their restaurant partners and merchant partners
• Advertising revenue that they earn from restaurant partners, merchant partners and brand partners for their advertising tools and services,
• Fees that they charge users and delivery partners for the use of our technology platform and
• Subscription revenue that they earn from users for their Swiggy One membership program.

Swiggy Company Growth Trajectory:

While the company continues to bear losses, they have shown commitment to improving their financials. Their logistics and grocery business continues to drive revenues for the company.

The company started food delivery business in 2014 and have since then grown leaps and bounds. Their total revenues have grown from 61,197.77 million in FY22 to 116,343.49 million in FY24. Similarly, their EBITDA Margin has grown consistently and is now only -0.2%. Their losses have halved from FY23 and now stands at ₹23502.43 million as against ₹41,793.05 crores in FY23.

Anchor Investors:

The anchor investor bid opens and ends on November 5, 2024. The company may allocate up to 60% of the QIB portion to anchor investors, out of which one third will be allocated to Mutual Funds.

Book Running lead managers:

Kotak Mahindra Capital Company Limited

Citigroup Global Markets India Private Limited

Jefferies India Private Limited

Avendus Capital Private Limited

J.P. Morgan India Private Limited

BofA Securities India Limited

ICICI Securities Limited

Subscription Details:

Qualified Institutional Buyers: 75%

Non-Institutional Investor: 15%

Retail Individual Investor: 10%

Potential benefits for investors

The following factors can help one understand the potential benefits of investing in Swiggy IPO

• India is one of the fastest growing large economies in the world with consumption being a major growth driver. With a total population of 1.4 billion, India is also the most populous nation in the world and this large consumer base drives significant demand for the consumer-oriented retail markets. By investing in Swiggy IPO, the investors can avail of an opportunity to be a part of a company that caters to a billion, not just millions.

• Hyperlocal commerce platforms are rapidly evolving to serve the emerging needs of various stakeholders and enhance their profitability. Innovative integration of multiple adjacent use-case into an integrated platform may lead to improved scalability and improved unit economics by leveraging existing capabilities. By investing in Swiggy IPO, investors can have a slice of a new age, innovative company that is driving the industry.

• Key investors like Accel India IV (Mauritius) Limited, Alpha Wave Ventures, Apoletto Asia Ltd, etc are selling their stakes in the company thus giving investors the potential for high returns.

• Key management personnel like Lakshmi Nandan Reddy Obul, Sriharsha Majety, P.R. Venkatrama Raja, are selling their stakes in the company thus giving investors the potential for high returns.

Retail and HNI Applications

The retail issue portion of the Swiggy IPO consists of not less than 2,89,74,491 equity shares of face value of ₹10. Not less than 10% of the net offer is for retail individual bidders

Key Strategies of Swiggy IPO

• Retain and grow user base by expanding their offerings and growing their partner network

• Expand Dark Store footprint and basket-sizes for quick commerce

• Invest in technology and optimise their last-mile network to enable efficient scaling of operations to service more users

Conclusion

Swiggy, a pioneer in the hyperlocal commerce platform industry, launched food delivery in 2014 and quick commerce in 2020. Over time, the company has quickly grown to be one of the top two food delivery companies in India. The company’s intuitive app, diverse offerings, timely discounts and offers, and a wide network of partners have enabled them to speed up deliveries and offer great choices.

However, hyperlocal platforms like Swiggy also face many challenges like continued losses, economic and inflationary pressures, logistics complexity and the rise of models like ONDC. If you want to invest in the IPO, ensure you do your homework and asses the risks and challenges thoroughly.