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Swiggy Ltd

An E-commerce Player Poised for Sustainable Growth

Swiggy Ltd., (Swiggy) established in 2013, is a new-age, user-centric technology company offering a comprehensive convenience platform through a single app. Users can order food, groceries, and household items (Instamart) for doorstep delivery via an on-demand network. The platform also includes restaurant reservations, product pick-up/drop-off services (Genie), and other hyperlocal commerce activities. Swiggy enhances its offerings with membership programs like Swiggy One, Swiggy Money, and the Swiggy-HDFC Bank credit card.

* The online food delivery market in India grew from Rs.112 billion (US$1.4 billion) in 2018 to Rs.640 billion (US$8 billion) in 2023 and is expected to become a Rs.1400-1700 billion (US$17-21 billion) market by 2028P, growing at a CAGR of 17-22%. 

* Convenience-focused Quick Commerce models are gaining traction among urban consumers and addressing supply chain inefficiencies. This segment is expected to grow rapidly, with a CAGR of 60-80%, reaching Rs.2.3-4.2 trillion (US$29-53 billion) by 2028 from Rs.224 billion (US$2.8 billion) in 2023.

* In the 10th year of its operations, Swiggy has achieved a significant milestone of 112.73 million users, who have transacted on their platform. This indicates its operational efficiencies, integrated app approach, innovations, customer retention and providing a seamless experience for its customers.

* Swiggy has reported strong topline growth of ~40% CAGR over FY22-24 to Rs.11,247cr in FY24, led by enhanced customer engagements and rapid delivery options in food delivery and Quick Commerce.

* On the profitability side, Swiggy has witnessed setbacks and has recorded negative cash flow from operations since inception.

* Going ahead, Swiggy's strategy to expand Dark Stores and introduce nongrocery categories is intended to enhance basket sizes and drive profitability.

* At the upper price band of Rs.390, Swiggy is available at Mcap/sales of 7.8x (on FY24 financials), which appears to be fairly priced. We assign a “Subscribe” rating for the issue on a long term investment basis, considering its strong brand recall, diversified offerings, integrated app, rapid scaling, consistent innovation, expansion of dark stores, and promising industry outlook.

Purpose of IPO

The IPO consists of a fresh issue of Rs.4,499cr and an offer for sale of Rs.6,828 by selling shareholders. The proceeds from its fresh issuance worth Rs.165cr will be utilised for the repayment or prepayment of borrowings of its subsidiary Scootsy, Rs.1,179cr for expansion of dark stores, ~Rs.703cr for technology investment and cloud infrastructure, Rs.1,115cr for brand marketing & promotion expenses and general corporate purposes.

Key Risks

* Net loss and negative cash flow from operations since incorporation. However, the profitability has narrowed 44%YoY to Rs.2,350cr in FY24.

* Rise in competition and other business model.

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SEBI Registration Number: INH200000345