Swiggy IPO Review: Should You Apply?

Swiggy, a leading online food and grocery delivery platform, is gearing up for its IPO with an issue size of ₹11,327.43 crore. The IPO is set to open on November 6, 2024 and close on November 8, 2024. In this review, we’ll examine Swiggy’s business model, strengths, financials, and the potential risks associated with investing in this IPO to help you decide if it’s the right investment for your portfolio.

IPO Details

• IPO Dates: November 6 – November 8, 2024
• Issue Size: ₹11,327.43 crore
• Price Band: ₹371 – ₹390 per share
• Listing Date: November 13, 2024
• Lot Size: 38 Shares
• Shares Offered: 290,446,837 shares
• Fresh Issue: 115,358,974 shares (₹4,499 crore)
• Offer for Sale: 175,087,863 shares (₹6,828.43 crore)
• Listing: BSE, NSE

Also Read: Swiggy IPO Updates: Latest GMP Trends and Key Details Ahead of Listing

Swiggy IPO Lot Size

Investors can bid for a minimum of 38 shares and in multiples thereof. The below table depicts the minimum and maximum investment by retail investors and HNI in terms of shares and amount.

About Swiggy

Swiggy, founded in 2013 by Sriharsha Majety, has grown to become a popular platform for ordering food and grocery deliveries through its Instamart service. With additional features such as restaurant reservations (Dineout), event booking (SteppinOut), and on-demand services (Genie), Swiggy has diversified its offerings to become a comprehensive hyperlocal commerce platform.

Key Features of Swiggy

• Swiggy One: Membership program offering discounts and deals.
• Swiggy Money & Swiggy UPI: Convenient in-app payment options.
• Swiggy-HDFC Credit Card: Co-branded card offering additional user benefits.
• Dineout Acquisition: Expands Swiggy’s footprint into offline restaurant services.
• Personalized Recommendations & Targeted Ads: Uses AI to enhance user experience and help partners attract new users.

Also Read: Swiggy’s IPO: What Investors Should Know

Strengths and Financial Highlights

Key Strengths

1. Diverse Offerings: With services beyond food delivery, including grocery delivery, event booking, and hyperlocal services, Swiggy has carved a broad niche in the hyperlocal commerce sector.
2. Large User Base: As of June 2024, Swiggy has reached 112.73 million users, demonstrating its popularity and growth potential in a competitive market.
3. Innovative Use of Data and AI: Swiggy uses targeted testing and analytics to refine its offerings and personalize user experiences, aiding in effective market expansion.
4. Strong Brand Presence and Partnerships: Swiggy’s partnerships with restaurants, grocery stores, and retail brands reinforce its market standing.

Financial Performance

Swiggy’s revenue growth has been significant, showcasing a steady upward trend over the last three fiscal years. Below is a summary of the company’s financials:

Revenue from Operations (₹ Cr):

• FY22: 5,704.90
• FY23: 8,264.60
• FY24: 11,247.39

Profit/Loss (₹ Cr):

• FY22: -3,628.90
• FY23: -4,179.30
• FY24: -2,350.24

Total Assets (₹ Cr):

• FY22: 14,406
• FY23: 11,281
• FY24: 10,529

While Swiggy’s revenue has grown considerably, the company has consistently reported losses due to high operational costs and extensive investment in expansion. However, the decline in losses from FY23 to FY24 reflects a potential improvement in cost management.

Risks to Consider

1. Continuous Losses: Swiggy has reported losses since inception, which could pose concerns for potential investors seeking profitability. While the company’s losses have declined recently, they still remain substantial.
2. Reliance on Delivery Partners: Swiggy’s operations heavily depend on its network of delivery partners, with no exclusive agreements. Challenges in retaining delivery partners, or a drop in their supply, could affect Swiggy’s delivery capabilities and customer satisfaction.
3. Dependence on Key Partners and Locations: Swiggy’s business is reliant on restaurant and merchant partners and strategically located warehouses (dark stores) to maintain swift deliveries. Any failure to retain partners or manage these locations effectively may impact operational efficiency.
4. Competitive Pressure: Swiggy operates in a highly competitive market alongside players like Zomato, Amazon, and Dunzo, which have similar business models. The ability to retain market share and innovate will be critical for Swiggy’s future success.
5. Legal and Regulatory Risks: Swiggy is involved in various ongoing legal proceedings, which, if unfavorable, could impact its business and reputation.
6. Debt Load: Swiggy has borrowings amounting to ₹255.58 crore as of July 2024. High debt levels may constrain financial flexibility, especially if revenues fail to offset operating costs.

IPO Valuation and Key Metrics

• Market Cap Post-IPO: ₹87,298.6 crore
• Return on Net Worth (RoNW): -8.21%
• Price-to-Book Value (P/BV): 11.6

The high valuation, despite consistent losses, reflects Swiggy’s market position and growth potential. However, these metrics also underscore the company’s need to enhance profitability and efficiency to justify its valuation.

Objects of the Issue

Swiggy aims to use the IPO proceeds for:

1. Repayment or pre-payment of borrowings through its subsidiary, Scootsy.
2. Expanding its quick commerce segment by setting up more dark stores and paying leases.
3. Investing in technology and cloud infrastructure.
4. Funding marketing and promotional activities to enhance brand visibility.
5. Pursuing acquisitions for growth.

Swiggy IPO Reservation Breakdown

Conclusion: Should You Apply?

Swiggy IPO Review: Swiggy’s IPO provides an opportunity to invest in one of India’s top players in the food delivery and hyperlocal commerce sectors. The company has shown strong revenue growth, innovative offerings, and an expanding user base, which are promising for long-term prospects. However, the company’s high valuation, consistent losses, and dependence on a complex network of partners and delivery personnel pose risks.

Reasons to Consider Applying:

• High Growth Potential: Swiggy’s diverse service offerings and strong market position suggest a promising future in the expanding food delivery and hyperlocal sectors.
• Long-Term Prospects: Investors with a high-risk tolerance and a long-term outlook may find the company’s market potential appealing.
• Strong Market Presence: Swiggy’s brand is well-known, and its strategic investments in technology and expansion could yield significant growth if managed effectively.

Reasons to Exercise Caution:

• Consistent Losses: Swiggy has yet to achieve profitability, and operational losses could continue as the company expands.
• Competitive Market Risks: Intense competition may pressure Swiggy to continue heavy spending to retain market share.
• High Valuation: Given Swiggy’s financials, the IPO’s valuation may appear stretched to some investors.

FAQs

1. What are Swiggy’s IPO dates?
Swiggy’s IPO will be open from November 6, 2024 to November 8, 2024.

2. What is the IPO price range?
The IPO price range is ₹371 to ₹390 per share.

3. When will Swiggy’s shares list on stock exchanges?
The shares are expected to list on November 13, 2024 on the BSE and NSE.

4. What are Swiggy’s primary revenue sources?
Swiggy generates revenue through food delivery fees, advertising, Swiggy One memberships, and commissions from restaurant and merchant partners.

5. What will the IPO proceeds be used for?
The funds raised will be allocated for debt repayment, dark store expansion, tech and cloud investment, brand marketing, and acquisitions.

Final Recommendation

The Swiggy IPO is appealing for investors with a high-risk appetite and a long-term horizon, especially those confident in Swiggy’s ability to manage operational costs and scale its quick commerce and hyperlocal services. Short-term investors or those seeking immediate profitability may find better opportunities elsewhere. Conducting thorough research and aligning this investment with personal financial goals and risk tolerance is essential before committing to this IPO.