Swiggy Ltd.
1 November 2024
By Majid Ahamed
About the Company
Swiggy is an Indian online food ordering and delivery company. Founded in 2014 and headquartered in Bangalore, Swiggy operates in over 580 Indian cities as of July 2023. In addition to food delivery, the platform offers quick commerce services under the name Swiggy Instamart and same-day package delivery through Swiggy Genie. Swiggy’s primary competitor in the food delivery and hyperlocal marketplace sector is the homegrown startup Zomato.
The company’s core business model is divided into 5 separate businesses:
- Food Delivery
- Out-of-Home Consumption
- Platform Innovations
- Quick Commerce
- Supply Chain and Distribution
Food Delivery
The company started the Food Delivery business in 2014 and offers on-demand Food Delivery services through a network of restaurant partners and delivery partners. On the Food Delivery marketplace, which is available through the mobile application or website, users can conveniently search and discover multiple restaurant listings, browse their menus, place food orders and pay seamlessly, and track order deliveries. They offer services to our restaurant partners to help them scale their business and increase their visibility on the platform, such as advertising and marketing opportunities. Swiggy is the leader in Monthly GOV(Gross Order Value) per MTU (Monthly Transacting Users) in Food Delivery, driven by higher customer engagement in Fiscal 2024. This segment contributes around 42.5% of the total revenue and has generated 5000 crores in this segment.
Out-of-Home Consumption
Out-of-home Consumption offerings include restaurant dining solutions (that we provide through Dineout) and access to curated outdoor events through SteppinOut, which is an outdoor events offering. Through this offering, we can cover all aspects of an event – from conceptualization, production, collaboration with ticketing platforms, venue booking, and event execution, in collaboration with third-party service providers.
Platform Innovation
The company endeavors to address unsolved user convenience problems underpinned by an innovation-led culture, and they continually incubate new service offerings to create more frequent and meaningful touchpoints for our users.
Some of their recent Platform Innovations include:
● Swiggy Genie: Launched in 2020 as an on-demand product pick-up/ drop-off service for users. This service is availed by a user for sending a product from one point to another within a city.
● Swiggy Minis: Launched in 2022 as a direct-to-consumer offering where local homegrown brands can establish their mini-storefront on our platform, engage with a broader user base, and benefit from our technology-enabled logistics capabilities and back-end services such as discovery, check-out, and payment.
Quick Commerce
The company launched Instamart in 2020 and offers on-demand grocery and a broad array of household items to users. On Instamart, users can access and browse a large selection of grocery and household items. These orders are received by merchant partners, processed through our Dark Stores, and delivered to users through delivery partners.
Swiggy Mall was launched in 2023 as a hyperlocal marketplace where users can shop for an expanded selection of convenience products, such as kitchen appliances, toys and games, athleisure wear, homeware and kitchenware, beauty products, books, stationery, and gifts.
Insanely Good was launched in February 2023 as a curated selection of premium food and grocery products. The integration of this extended selection of categories and products into Instamart provides our users with wider and deeper choices, aimed at garnering a higher share of their household spending.
Supply Chain and Distribution
The company offers comprehensive supply chain services to wholesalers and retailers. By leveraging the warehousing capabilities, they streamline the value chain to provide reliable, fast, and cost-effective order fulfillment for wholesalers and retailers. The supply chain solutions to our wholesale and retail partners encompass warehouse management to streamline operations, in-warehouse processing that includes value-added services to enhance product delivery, and efficient order fulfillment which enables efficient order picking, packing, and shipping processes for the wholesalers and retailers. As of June 30, 2024, they have managed 2.66 million sq. ft. of warehousing space across 13 cities had approximately 680 authorized brand distribution partnerships, and served approximately 87,000 retailers and wholesalers
Object for Issue
The company is looking to raise capital of around ₹11,327.43 Crores in total in the IPO, of which ₹4,499 Crores is Fresh Issue where the amount is invested in the company and ₹6,828.43 Cr is the Offer for Sale (OFS) where this amount is given to the existing shareholders or investors by selling the shares. The price band the company is looking to issue the share at ₹390.
The fresh issue of ₹4,499 crores will be allocated as follows:
- Debt Repayment: ₹164.8 crores to repay loans for subsidiary Scootsy Logistics Private Limited by FY25.
- Investment in Scootsy Logistics: ₹1,178.7 crores, including:
- Dark Store Expansion: ₹755.4 crores to set up approximately 741 new stores.
- Lease Payments: ₹423.4 crores for dark store leases from FY25 to FY28.
- Technology and Cloud Infrastructure: ₹703.4 crores from FY25 to FY28 to strengthen tech capabilities.
- Brand Marketing and Promotion: ₹1,153 crores for digital and non-digital marketing to enhance brand visibility and reach through targeted campaigns and ATL marketing, including TV ads.
- General Corporate Purposes and Acquisitions: The remaining ₹1,336.8 crores for general use and potential acquisitions.
The QIB (Qualified Institutional Buyer) is allocated to 75% of the total offer, Retail Shares are offered 10%, and the other 15% is allocated to HNI’s (High Net Worth Individuals).
IPO Lot Size
Valuation:
The company is targeting a market capitalization of ₹87,298.6 crores, with a Price-to-Sales (P/S) ratio of 7.5. Comparatively, peers like Zomato Ltd, which is publicly listed, have a P/S of 13.9, while privately held Zepto has a P/S of 21. This makes Swiggy appear relatively undervalued based on P/S, which is more suitable than P/E since these companies are primarily loss-making.
The Quick Commerce segment in India is projected to be the fastest-growing retail channel, with a CAGR of 60-80%, reaching ₹2.3-4.2 trillion (US$29-53 billion) by 2028, up from ₹224 billion (US$2.8 billion) in 2023. Near-term growth is expected to be even higher, at 80-100% annually over the next two years, driven by increasing user adoption, geographic expansion, rising average order values, basket size, and category expansion.
The funds raised will focus on expanding dark stores and scaling the Quick Commerce segment, integrated into a single application that offers food delivery and other services. Unlike market leader Zomato, which uses separate apps, Swiggy’s unified platform may enhance user experience. Although Quick Commerce currently operates at a loss, its fixed-cost model, coupled with growing data usage and demand for delivery services, offers a strong growth trajectory.
Investors could consider a mid-to-long-term investment in Swiggy, given the strong tailwinds in the Quick Commerce sector.