Key Points
- Swiggy sees itself as a tech company focused on customers.
- The IPO puts the company’s value at ₹87,000 crore.
- Swiggy’s food delivery service is getting closer to making a profit.
- Zomato currently has more market share, especially in quick commerce.
- The online food delivery market in India is expected to grow a lot.
Looma News
Swiggy’s red herring prospectus (RHP) describes the company as a tech firm focused on customers, providing services for food delivery, groceries, and household items. This is similar to how Zomato, Swiggy’s main competitor, describes its business as connecting customers with restaurants and delivery partners.
India’s digital economy has a lot of growth potential. While the market is promising, competition between companies like Swiggy and Zomato raises questions about long-term success. Swiggy’s IPO opens on November 6, 2024, aiming to raise ₹11,327 crore and giving the company a market cap of ₹87,000 crore.
Although Swiggy isn’t profitable yet, it has shown steady improvement, especially in food delivery, which reported profitability at the adjusted EBITDA level in Q1 FY25. The company has a solid balance sheet with around ₹4,800 crore in net cash, expected to increase to over ₹9,000 crore after the IPO.
While Zomato leads in both food delivery and quick commerce, it is particularly strong in quick commerce, where it had a 50% edge in gross order value for FY24. Swiggy’s IPO is attractively priced at 6.5 times EV/Revenue, which is much lower than Zomato’s valuation, making it a tempting option for risk-tolerant investors.
Business Model
Swiggy started as a food delivery service in 2014 and has since expanded into quick commerce, pick-up/drop-off services, and dining options. Its B2C segment makes up 61% of revenue, with food delivery and quick commerce accounting for 97% of this. The rest comes from B2B services that focus on supply chain management for wholesalers and retailers.
Swiggy makes money through commissions from restaurant partners, advertising, user fees, and subscription services. The quick commerce side has costs for building supply chains and delivery networks. Future growth will depend on attracting more users and expanding service offerings to improve overall profitability.
Market Opportunity
Swiggy’s success will largely hinge on growing its user base and encouraging more engagement on its platform. The online food delivery market in India was worth ₹60,000 crore in FY23 and is expected to grow at a rate of 20% each year, reaching ₹1.5 lakh crore by FY28. Both Swiggy and Zomato could outperform the market if they execute their strategies well.
