 "Swiggy's recipe for success: DRHP reveals key ingredients ahead of IPO")
Swiggy IPO: Leading Indian food aggregator and delivery platform Swiggy is all set to go public as the company has filed the draft red herring prospectus (DRHP) with the markets regulator, Securities and Exchange Board of India (Sebi).
The Indian primary market has been booming this year, with as many as 62 mainboard companies going public, including Ola Electric, and Bajaj Housing Finance, being some of the notable companies to grace the list.
As investors await further details for this buzzing IPO, here are some of the key details related to Swiggy, as outlined in the DRHP papers.
Swiggy IPO details
Swiggy’s IPO comprises a fresh issue of shares of up to Rs 3,750 crore, and an offer for sale with shareholders offloading up to 185,286,265 equity shares of the company. Accel India IV (Mauritius), Apoletto Asia, Alpha Wave Ventures, Inspired Elite Investments, Tencent Cloud Europe, and MIH India Food Holdings were among the 10 shareholders of Swiggy who will be participating in the IPO for the OFS.
Swiggy, in the DRHP papers, said that the company will not receive any proceeds from the offer for sale portion, and the selling shareholders shall be entitled to the offer proceeds to the extent of the equity shares offered by them in the Offer for Sale.
The company further said that it intends to utilise the proceeds from the fresh issue for investment in its material subsidiary, Scootsy, for repayment or prepayment, in full or in part, of certain or all of its borrowings, as well as for the expansion of the Dark Store network for the quick commerce segment through the setting up of Dark Stores and making lease/licence payments for Dark Stores.
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Swiggy will also utilise the proceeds for investment in technology and cloud infrastructure, brand marketing, and business promotion expenses for enhancing the brand awareness and visibility of the platform across segments, and for funding inorganic growth through unidentified acquisitions.
Link Intime India is the registrar for the Swiggy IPO, while JP Morgan India, BofA Securities India, Jefferies India, Kotak Mahindra Capital Company, Citigroup Global Markets India, Avendus Capital and ICICI Securities are the book running lead managers for the public issue.
Swiggy IPO financials details
As per the information available in the DRHP, the food delivery aggregator has posted its revenue from operations at Rs 3,222.21 crore in the first quarter of FY25 against Rs 2,389.81 crore reported in the corresponding quarter of FY24. It stood at Rs 11,247.40 crore in FY24, Rs 8264.60 crore in FY23, and Rs 5,704.89 crore in FY22.
Swiggy’s total expenses for Q1FY25 stood at Rs 3,907.95 crore against Rs 3,072.56 crore in Q1FY24. It stood at Rs 13,947.38 crore in FY24, Rs 12,884.40 crore in FY23, and Rs 9,574.45 crore in FY22.
The food delivery aggregator’s total liabilities were reported at Rs 2,896.25 crore in Q1FY25, against Rs 2,526.26 crore reported in Q1FY24. It was reported at Rs 2,737.96 crore in FY24, Rs 2,224.03 crore in FY23, and Rs 2,138.82 crore in FY22.
Whereas Swiggy’s total assets were reported at Rs 10,341.24 crore in Q1FY25 against Rs 2,526.26 crore reported in Q1FY24. The company’s total assets were recorded at Rs 10,529.42 crore in FY24, Rs 11,280.64 crore in FY23, and Rs 14,405.73 crore in FY22.
Swiggy IPO key risks
Here are some of the key risks that the company has outlined in the DRHP papers.
Swiggy said that it has incurred net losses each year since incorporation and has negative cash flows from operations. If the company fails to generate adequate revenue growth and manage its expenses and cash flows, it may continue to incur significant losses.
Swiggy’s material subsidiary, Scootsy, has also incurred losses in the past. As per the DRHP papers, Scootsy Logistics incurred losses of Rs 423.97 crore in FY24, Rs 407.03 crore in FY23, and Rs 295.35 crore in FY22. Swiggy further said that, if it continues to incur losses, the company may be required to continue providing financial support, which may adversely affect Swiggy’s consolidated results of operations and financial condition.
Moreover, Swiggy depends on mobile operating systems for its operations, and any changes to their terms and conditions could impact Swiggy’s operations.
Swiggy further said that it faces intense competition across the markets it serves. If Swiggy is unable to compete effectively, its business, financial condition, and results of operations would be adversely affected. Some of the key competitors include Zomato, QSR chains offering delivery services, Eazydiner, Blinkit (Zomato), Zepto, and BB Now (Big Basket).
Favourable factors for Swiggy
According to information shared in the DRHP by Swiggy, the online food delivery market and the quick commerce market in India are expected to grow at a CAGR of approximately 17 to 22 per cent and 60 to 80 per cent , respectively, from 2023 to 2028, according to the Redseer Report. Swiggy in the DRHP papers said that the company aims to build innovative solutions that deliver unparalleled convenience to urban users.
“Being among the first hyperlocal commerce platforms, Swiggy has successfully pioneered the industry in India, launching food delivery in 2014 and quick commerce in 2020, and due to the pioneering status of Swiggy, it is well-recognized as a leader in innovation in hyperlocal commerce and as a brand synonymous with the categories it is present in, according to the Redseer Report,” said Swiggy in the DRHP.
The company further said that, Kantar BrandZ Most Valuable Indian Brands Report 2024, has named Swiggy as the most valuable brand in the Consumer Technology & Services Platforms category, and is among the Top 25 most valuable brands in India overall (Redseer Report). “Owing to the pioneering status of Swiggy, it is well-recognised as a brand synonymous with the categories it is present in, according to the Redseer Report. We believe this has helped us position ‘Swiggy’ as a household brand that represents convenience and quality in users’ minds,” said Swiggy.
Swiggy further said that in their tenth year of operations, the company reached a milestone of 112.73 million users that have transacted on its platform (ever transacted users) on June 30, 2024. The company attributed this to its unified app, growing offerings, and wide network of partners driving greater selection and faster delivery times, all of which enhance user experience on its platform and encourage more users to transact. “As a result, we have witnessed consistent growth in our base of monthly transacting users, both for food delivery and quick commerce individually, as well as for the overall platform,” said Swiggy.