Swiggy’s Upcoming IPO: A Deep Dive into India’s Hyperlocal Commerce Leader
Popular food delivery app and owner of the Instamart brand, Swiggy, is gearing up to tap into the IPO markets. Launched in 2014 primarily as a food delivery service, Swiggy expanded into quick commerce in 2020, establishing itself as a key player in India’s hyperlocal commerce market. Beyond food delivery, Swiggy offers services for restaurant reservations, event bookings, product pick-up/drop-off, and various other hyperlocal activities.
Issue Size and Use of Funds
Swiggy is seeking to raise approximately ₹11,328 crore through its IPO, which includes a fresh issue of up to ₹4,499 crore and an Offer for Sale (OFS) for the remaining ₹6,828 crore. The fresh issue will be allocated as follows:
- Brand Marketing: 25% of the funds will be directed towards brand marketing and business promotion, aimed at increasing user acquisition and retention.
- Technology Investments: A portion will be invested in enhancing their technological infrastructure to improve service delivery.
- Expansion Plans: Funds will also support the expansion into new cities and the enhancement of their last-mile delivery network.
History
Swiggy’s journey began in 2014, initially focusing on food delivery. The company quickly gained traction, leveraging technology to streamline operations and enhance customer experience. In 2020, Swiggy ventured into quick commerce, launching Instamart to cater to the growing demand for rapid grocery delivery. This strategic move positioned Swiggy as a formidable competitor in the hyperlocal commerce landscape.
Industry Overview
The hyperlocal commerce market in India is experiencing rapid growth, fueled by increasing internet penetration, smartphone usage, and a shift towards convenience-driven services. The online food delivery segment was valued at approximately ₹63,000 crore in FY 2023, with projections indicating it will reach around ₹1.8 lakh crore by FY 2028, growing at a CAGR of 23%.
The quick commerce segment is also on an upward trajectory, valued at around ₹5,600 crore in FY 2023 and expected to grow to ₹35,000 crore by FY 2028, at a staggering CAGR of 45%. These statistics highlight the immense growth potential for Swiggy as the industry becomes more digitally integrated and consumer preferences evolve.
Segments
Swiggy operates in five main segments:
- Food Delivery: The primary segment, which has achieved profitability.
- Quick Commerce: Rapid grocery delivery through Instamart.
- Out-of-Home Consumption: Services like Swiggy Dineout.
- Supply Chain and Distribution: Catering to wholesalers and retailers.
- Other Hyperlocal Services: Including event bookings and product deliveries.
As of June 30, 2024, the food delivery segment remains the only profitable area, while other segments are progressively reducing their losses compared to previous years.
Swiggy vs. Zomato: A Detailed Comparison
Food Delivery
Swiggy’s food delivery segment has shown steady growth, with a consistent rise in the total number of orders. The Gross Order Value (GOV), which reflects the total monetary value of all orders, has been climbing, leading to increased commission revenue and delivery fees.
While both Swiggy and Zomato have made strides in reducing losses in this segment, Zomato has managed to cut losses at a faster rate.
Quick Commerce
The quick commerce segment has witnessed impressive growth, driven by changing consumer lifestyles and a preference for faster delivery. Swiggy’s ability to deliver within 10-20 minutes relies heavily on its network of dark stores—fulfillment centers designed exclusively for online orders.
Both Swiggy and Zomato are growing at a similar pace in this area, although Zomato’s growth rate is slightly faster.
Out-of-Home Consumption
This segment includes services like Swiggy Dineout, which has seen significant growth in GOV. However, tighter profit margins may pose challenges for long-term sustainability.
Supply Chain and Distribution
Swiggy has expanded its supply chain services significantly, managing 2.66 million sq. ft. of warehousing space across 13 cities and serving around 87,000 retailers and wholesalers. Zomato is just beginning to explore this space.
Overall Business Performance
While both companies have increased their reach and revenue, Zomato has outpaced Swiggy in recent years. Higher marketing expenses have weighed on Swiggy, despite both companies managing to reduce operating losses.
Consumer-Friendly Features
| Feature | Swiggy | Zomato |
|---|---|---|
| Dark Mode | Yes | Yes |
| Loyalty Programs | Swiggy Super: Free deliveries, no surge fees | Zomato Gold/Pro: Exclusive discounts |
| Quick Commerce | Swiggy Instamart: Fast grocery delivery | Blinkit (acquired): Quick grocery delivery |
| Package Delivery | Swiggy Genie: Send packages within the city | Not available |
| Dining Out Services | Table reservations, dining discounts | Table reservations, dining discounts |
| Exclusive Deals | Partnered with restaurants for special offers | Partnered with restaurants for exclusive deals |
| Subscription Services | Swiggy One: Combined benefits of Super and Instamart | Zomato Pro Plus: Enhanced benefits over Zomato Pro |
| Eco-Friendly Initiatives | Sustainable packaging, reduced plastic usage | Sustainable packaging, reduced plastic usage |
| B2B Initiatives | Supply chain management services | Hyperpure: Sourcing high-quality ingredients |
Future Prospects
Swiggy has ambitious plans for growth and expansion. The company aims to attract more users by offering greater convenience, a wider range of products, and faster delivery times. Plans include expanding into more cities and enhancing their Dark Stores for quicker deliveries.
Additionally, Swiggy is focusing on segmented services like the budget-friendly PocketHero and the premium Swiggy Gourmet to cater to diverse customer needs.
Conclusion
In conclusion, Swiggy’s IPO represents a significant step in solidifying its position in India’s hyperlocal commerce market. By focusing on expanding its food delivery and quick commerce segments, Swiggy aims to meet the growing demand for fast, convenient, and diverse delivery options. With strategic investments in technology, brand marketing, and last-mile delivery networks, Swiggy is poised to attract more users and sustain its growth trajectory.
Disclaimer: This article is for informational purposes only and should not be considered investment advice. Investors are encouraged to consult with experts before making any investment decisions.