Swiggy, a prominent player in India's online food delivery market, has recently taken significant steps toward its initial public offering (IPO) by submitting updated draft papers to the Securities and Exchange Board of India (Sebi) for an impressive ₹10,000 crore IPO. This strategic move not only underscores Swiggy's ambition but also positions the company to directly challenge its key competitor, Zomato, which has been a darling among investors since its own IPO in 2021.
The structure of Swiggy's upcoming IPO consists of two primary components: a fresh issue of equity shares valued at ₹3,750 crore and an offer for sale (OFS) involving approximately 18.52 crore shares currently held by existing stakeholders. During an extraordinary general meeting (EGM), the company proposed to raise the fresh issue to ₹5,000 crore (around $600 million), showcasing its intentions to strengthen its financial footing as it prepares for the public listing.
Several notable investors, including Prosus, Accel, Tencent, and Elevation Capital, are expected to partially divest their stakes through the OFS mechanism. Importantly, SoftBank, one of Swiggy's major backers, has opted to retain its shares and will not participate in this offering. Prosus, which holds a significant 30.95% stake in Swiggy, plans to offload around 118.2 million shares, valued at over $500 million. This strategic sale represents more than 60% of the total OFS, making Prosus a crucial player in the journey toward Swiggy's public listing.
Swiggy's ₹10,000 crore IPO is noteworthy as it represents the largest offering from new-age companies in India since Paytm's record-breaking ₹18,300 crore IPO in 2021. This new IPO eclipses Zomato's own ₹9,375 crore listing and Ola Electric's ₹6,146 crore issue from August 2024. Other significant IPOs in the rapidly evolving landscape of Indian startups include FirstCry, Go Digit, and Ixigo, all of which contribute to the maturation and expansion of India’s vibrant startup ecosystem.
A substantial portion of the funds raised through this IPO is earmarked for the expansion of Swiggy's quick commerce division, Instamart. The company has allocated ₹982.4 crore for this initiative, which includes ₹559.1 crore for establishing dark stores and ₹423.3 crore for leasing or licensing these facilities. These dark stores are pivotal for fulfilling Swiggy's promise of lightning-fast, ten-minute delivery times, a crucial factor in a market that is becoming increasingly saturated with competitors such as Zepto, Zomato’s Blinkit, and Tata-owned BigBasket.
In terms of financial performance, Swiggy has demonstrated resilience, although it continues to grapple with intense competition. For the June quarter of FY25, Swiggy reported a notable 34% increase in operating revenue, reaching ₹3,222 crore. However, the company’s net losses have widened to ₹611 crore, up from ₹564 crore in the previous year, primarily due to aggressive competition in the quick commerce segment. Despite these challenges, Swiggy's Instamart division has experienced impressive growth, with the number of dark stores increasing to 557 and the gross order value surpassing ₹2,724 crore—a remarkable 50% growth.
When it comes to valuation, Swiggy’s last funding round in January 2022 placed the company’s worth at approximately $10.7 billion. Since then, crossover investors like Invesco and Baron Capital have revised Swiggy’s fair value to about $15 billion, reflecting robust confidence in the company’s growth potential and its ability to capture a significant share of the market.
As Swiggy prepares for its IPO, it is essential to highlight the competitive landscape it is navigating. Zomato, its chief rival, has continued to thrive in public markets, with its stock price surging over 125% year-to-date, largely driven by the success of its quick commerce division, Blinkit. In the first quarter of FY25, Zomato reported a net profit of ₹253 crore, with operating revenue soaring by 74% to ₹4,206 crore. Blinkit, which is rapidly expanding its network of dark stores, currently has 639 locations and plans to increase this number to 2,000 by 2026, highlighting the intense competition Swiggy faces.
The buzz surrounding Swiggy's pre-IPO activities has been significant, with shares in the unlisted market experiencing a remarkable surge of nearly 40% in recent months, climbing from ₹355 in July to ₹490 in September. This pre-IPO excitement has attracted high-profile investors, including celebrities like Rahul Dravid, Amitabh Bachchan, and Karan Johar, further amplifying the anticipation surrounding Swiggy's upcoming listing, which is expected to take place in November.
As Swiggy takes its initial steps toward going public, the company is not merely focused on raising capital; it is also aiming to solidify its position in India’s fiercely competitive quick commerce and food delivery sectors. With ambitious plans for expansion, substantial backing from influential investors, and a growing presence in the quick commerce space, Swiggy is well-positioned to navigate the challenges ahead. The upcoming IPO represents a pivotal moment for the company, potentially enabling it to enhance its market share, drive further growth, and strengthen its overall standing in a rapidly evolving industry.
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