Swiggy, India’s prominent food aggregator and delivery platform, is gearing up for a highly anticipated initial public offering (IPO). The company has taken a significant step towards going public by filing its Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). Swiggy’s move comes at a time when the Indian primary market is experiencing a surge in activity, with as many as 62 mainboard companies making their debut in 2024. Notable IPOs in this bustling market include Ola Electric and Bajaj Housing Finance, making Swiggy’s offering one of the most eagerly awaited.
The DRHP reveals crucial information about Swiggy’s financials, its planned use of funds, and the potential risks and opportunities the company faces as it navigates through the competitive landscape of the food delivery and quick commerce markets. Let’s delve deeper into the key details outlined in Swiggy’s DRHP.
Swiggy IPO Overview and Details from DRHP
Swiggy’s IPO will consist of a fresh issue of shares amounting to Rs 3,750 crore, along with an Offer for Sale (OFS) comprising 185,286,265 equity shares. The key shareholders who are set to participate in the OFS include major players like Accel India IV (Mauritius), Apoletto Asia, Alpha Wave Ventures, Inspired Elite Investments, Tencent Cloud Europe, and MIH India Food Holdings.
According to the DRHP, Swiggy will not receive any proceeds from the OFS portion, as the funds will directly go to the selling shareholders. However, the proceeds from the fresh issue will be used for several strategic initiatives aimed at bolstering the company’s position in the market. The company plans to invest in its material subsidiary, Scootsy, which is integral to its quick commerce segment. Additionally, Swiggy aims to use these funds for repayment or prepayment of loans, expansion of its Dark Store network, and investment in technology and cloud infrastructure.
Another key focus for Swiggy, as highlighted in the DRHP, is brand marketing and business promotion, which will help enhance the platform’s visibility across various segments. The funds will also be allocated for potential acquisitions, ensuring that Swiggy remains competitive in the rapidly evolving landscape of food delivery and quick commerce.
JP Morgan India, BofA Securities India, Jefferies India, Kotak Mahindra Capital Company, Citigroup Global Markets India, Avendus Capital, and ICICI Securities are serving as the book-running lead managers for Swiggy’s public issue. Link Intime India has been appointed as the registrar for the IPO.
Financial Performance and Insights from DRHP
Swiggy’s financials, as detailed in the DRHP, reflect strong growth in revenue, though the company continues to face challenges in managing its expenses. For the first quarter of FY25, Swiggy reported a revenue of Rs 3,222.21 crore, a significant increase from Rs 2,389.81 crore in the same quarter of FY24. The company’s revenue for FY24 stood at Rs 11,247.40 crore, up from Rs 8,264.60 crore in FY23 and Rs 5,704.89 crore in FY22, demonstrating a steady upward trajectory.
However, Swiggy’s expenses have also grown considerably. For Q1FY25, the company reported total expenses of Rs 3,907.95 crore, compared to Rs 3,072.56 crore in Q1FY24. Full-year expenses for FY24 reached Rs 13,947.38 crore, an increase from Rs 12,884.40 crore in FY23 and Rs 9,574.45 crore in FY22. Despite this rise in expenses, Swiggy’s assets have also shown growth, with total assets valued at Rs 10,341.24 crore in Q1FY25, up from Rs 10,529.42 crore in FY24 and Rs 11,280.64 crore in FY23.
On the liability front, Swiggy’s total liabilities stood at Rs 2,896.25 crore in Q1FY25, up from Rs 2,526.26 crore in Q1FY24. While the company has made strides in growing its revenue and assets, managing its expenses and liabilities will be critical to its future success, a point emphasized in the DRHP.
Key Risks Highlighted in DRHP
The DRHP outlines several risks that investors should consider before Swiggy’s IPO. A major concern is the company’s history of net losses since its inception. Swiggy has also consistently generated negative cash flows from operations. The company’s ability to achieve sustainable revenue growth while controlling its expenses will be crucial in determining whether these losses can be reversed in the future.
Swiggy’s material subsidiary, Scootsy, which plays a pivotal role in the quick commerce segment, has also reported significant losses in recent years. In FY24, Scootsy incurred losses of Rs 423.97 crore, a slight increase from Rs 407.03 crore in FY23 and Rs 295.35 crore in FY22. Swiggy acknowledged in the DRHP that if Scootsy’s financial performance does not improve, it may need to continue providing financial support, which could adversely affect its consolidated financial position.
Additionally, Swiggy’s reliance on mobile operating systems for its platform presents a risk, as any unfavorable changes in these systems could impact its operations. The company also faces intense competition from several key players, including Zomato, Blinkit, Zepto, and BB Now, which could affect its market share and growth prospects.
Growth Prospects Outlined in DRHP
Despite these risks, the DRHP highlights Swiggy’s significant growth potential. The online food delivery and quick commerce markets in India are expected to grow at compound annual growth rates (CAGR) of 17-22% and 60-80%, respectively, from 2023 to 2028, according to Redseer. Swiggy, with its pioneering status in these sectors, is well-positioned to capitalize on this growth.
The company has established itself as a leader in innovation within India’s hyperlocal commerce space, launching food delivery services in 2014 and quick commerce operations in 2020. Swiggy’s commitment to delivering convenience to urban consumers has earned it recognition in the Kantar BrandZ Most Valuable Indian Brands Report 2024, where it was named the most valuable brand in the Consumer Technology & Services Platforms category.
Swiggy’s user base has also expanded significantly, with over 112.73 million users having transacted on its platform as of June 30, 2024. The company’s growing offerings, unified app, and extensive partner network have contributed to faster delivery times and a superior user experience, driving more users to transact on the platform.
As Swiggy prepares for its IPO, the company aims to reinforce its leadership position in India’s burgeoning food delivery and quick commerce sectors by continuing to innovate and enhance its offerings.
You might also be interested in – Swiggy is expected to file its draft IPO documents this week and could raise over $1 billion through the offering.
