Swiggy IPO: Quick Commerce Dreams or Risky Investment Reality?
In this analysis, we take a closer look at Swiggy Ltd and present you with the exclusive IPO details.
About the issue
Swiggy Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. Below are the issue details.
| IPO Details |
| IPO Opening Date |
November 06, 2024 |
| IPO Closing Date |
November 08, 2024 |
| Issue Type |
Book Built Issue IPO |
| Face Value |
Re 1 per equity share |
| IPO Price |
Rs 371 to Rs 390 per equity share |
| Min Order Quantity |
38 shares |
| Listing At |
BSE, NSE |
| Total Issue |
290,446,837 shares of FV Re 1* |
| (Aggregating up to Rs 11,327.43 Cr)* |
| Fresh Issue |
115,358,974 shares of FV Re 1* |
| (Aggregating up to Rs 4,499.00 Cr)* |
| Offer for Sale |
175,087,863 shares of FV Re 1* |
| (Aggregating up to Rs 6,828.43 Cr)* |
| QIB Shares Offered |
75% of the Offer |
| Retail Shares Offered |
10% of the Offer |
| NII (HNI) Shares Offered |
15% of the Offer |
| *At Upper Price Band |
|
Objects of the Issue
The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:
1. Investment in the material subsidiary, Scootsy, for repayment or pre-payment, in full or in part, of certain or all of its borrowings.
2. Investment in the material subsidiary, Scootsy, for (a) expansion of Dark Store network for Quick Commerce segment through setting up of Dark Stores; and (b) making lease/license payments for Dark Stores.
3. Investment in technology and cloud infrastructure.
4. Brand marketing and business promotion expenses for enhancing the brand awareness and visibility of its platform across segments.
5. Funding inorganic growth through unidentified acquisitions and general corporate purposes.
Promoter holding
The company states that it is professionally managed and does not have any identifiable promoter.
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Company profile
Swiggy is a new-age, consumer-centric technology company providing a seamless convenience platform through a unified app, allowing users to browse, select, order, and pay for a range of items including food (Food Delivery), groceries, and household essentials (Instamart), with doorstep delivery facilitated by an on-demand partner network.
As of June 30, 2024, Instamart managed an extensive network of 557 active dark stores across 32 cities in India, which expanded to 605 active dark stores across 43 cities by September 10, 2024.
Swiggy's platform also enables users to make restaurant reservations (Dineout), book events (SteppinOut), access product pick-up and drop-off services (Genie), and engage in various hyperlocal activities (Swiggy Minis).
To enhance user value, the company offers a membership program, ‘Swiggy One,’ with discounts and exclusive offers, along with in-app payment options such as the digital wallet ‘Swiggy Money,’ ‘Swiggy UPI,’ and the Swiggy-HDFC Bank credit card for added benefits.
Financials
| Rs (in crore) |
FY22 |
FY23 |
FY24 |
Q1FY25 |
| Revenue |
6,120 |
8,714 |
11,634 |
3,310 |
| Profit before tax |
-3,629 |
-4,179 |
-2,350 |
-611 |
| Net profit |
-3,629 |
-4,179 |
-2,350 |
-611 |
The company has consistently delivered strong growth in revenue over the past few years. Between FY22 and FY24, the company recorded a Compound Annual Growth Rate (CAGR) of 38 per cent in revenue. When annualized, the figures from the June quarter show decent topline growth of around 14 per cent compared to FY24.
However, the company's consistent loss-making status over several periods dampens investor optimism about profitability. Despite the strong revenue growth, profitability remains challenged, mainly due to high finance costs and depreciation expenses. Additionally, elevated spending on advertising and delivery contributes significantly to the company's ongoing expenses.
Valuation & Outlook
| Company Name |
P/E |
P/B |
RoE (%)* |
| Swiggy Ltd |
- |
12 |
- |
| Listed Peers |
| Zomato Ltd |
287 |
10 |
2 |
*RoE: Based on FY24 data
The issue is priced with a P/BV ratio of 11.60 times, calculated using its Net Asset Value (NAV) of Rs 33.61 as of June 30, 2024. At the upper price cap, it is priced at a P/BV ratio of 7.31 times, considering its post-IPO NAV.
Considering the company's annualized earnings for FY25 or FY24 along with its fully diluted equity capital, the price-to-earnings (P/E) ratio remains negative, reflecting its current loss-making position.
Following its IPO, experts anticipate that the company will aim to achieve profitability in the near term, likely within a few more quarters. This would be driven by reducing interest burden, cutting promotional spending and capitalizing on the ongoing growth of the online food delivery market.
While the company may offer promising long-term growth prospects, current weak market conditions and uncertainties around profitability create concerns. Given these factors, we advise investors to avoid this aggressively priced investment, which is currently yielding negative returns.