Swiggy, the popular food delivery app, has recently been a hot topic, with investors and celebrities eagerly awaiting its public listing. Amitabh Bachchan, Madhuri Dixit, Rahul Dravid, Zaheer Khan, and numerous businesspeople have already purchased unlisted shares of Swiggy, making it one of the most talked-about IPOs in India. But why all this excitement? Let’s break it down.
Why Is Everyone Excited About Swiggy’s IPO?
Swiggy has become a household name in India, but there’s more to this story. Back in 2021, Swiggy was leading in market share, surpassing competitors like Zomato. This, along with its diverse business model, has caught the attention of investors across the globe. We’ll discuss in detail why Swiggy is gaining so much attention, and why it’s drawing so many people to its IPO.
What’s in the Swiggy IPO?
Swiggy’s IPO is opening on 6th November 2024, with a price band ranging from ₹3371 to ₹3900 per share. This puts the company’s valuation at around ₹87,000 crore. While the IPO is receiving a lot of attention, it’s important to understand both the opportunities and risks before making an investment decision.
The Swiggy Business Model
Swiggy has positioned itself as a super app by offering a wide range of services. Here’s a look at what they offer:
- Food Delivery: The core service that made Swiggy a household name.
- Dining Reservations: You can make restaurant reservations and avail discounts.
- Quick Commerce: Products are delivered in as little as 10-15 minutes.
- Event Bookings and Pick-Up/Drop Services: Expanding beyond food delivery into new areas.
- Swiggy Mini: A platform for small convenience items.
By integrating all these services into one app, Swiggy reduces operational costs. For example, a single delivery person may bring multiple items, such as food and groceries, to the same location. This, in turn, cuts down on delivery charges, improving efficiency.
The Super App Advantage
The major advantage of a super app like Swiggy is the reduction in customer acquisition costs. By offering multiple services, Swiggy has a higher chance of retaining users and encouraging them to use the app for different purposes. If you’re ordering food, you may also end up ordering groceries or other services from Swiggy, which lowers the cost per user.
However, in India, people tend to prefer separate apps for different services, which is why the super app model has had mixed success.
Zomato vs Swiggy: The Rivalry
When comparing Swiggy and Zomato, Swiggy has shown impressive growth in terms of order value and user engagement. Zomato may have a higher number of orders, but Swiggy has been leading in terms of both revenue and user retention in recent years.
Swiggy’s Growth in Revenue
Swiggy’s revenue has grown rapidly, from ₹6120 crore in 2022 to ₹11,634 crore in 2024, reflecting an annual growth rate of 37%. This is an impressive achievement, but the major challenge for Swiggy remains its profitability.
- In 2022, Swiggy posted a loss of ₹3600 crore.
- In 2023, losses increased to ₹4000 crore.
- In 2024, losses are still significant, estimated at ₹2350 crore for the year.
Despite growing revenue, Swiggy has yet to turn a profit, which is a major concern for investors. Profitability is something you’ll need to keep an eye on before considering this IPO as a long-term investment.
The Valuation and Grey Market Premium (GMP)
The price band for Swiggy’s IPO is between ₹3371 to ₹3900, which translates into a market cap of approximately ₹87,000 crore. When compared with competitors like Zomato, Swiggy’s valuation doesn’t seem overly aggressive, but its lack of profitability makes it hard to determine the true worth.
An important factor to consider is the grey market premium (GMP). Currently, the GMP for Swiggy is not very high, which suggests that the IPO may not see massive listing gains. Also, the number of subscriptions is a key metric to watch. If the IPO receives more than 10 times subscription in the first two days, it may indicate a positive listing, but the gains might not be as substantial as some hope.
Risk Factors to Consider
It’s crucial to note that large IPOs, like this one, often face challenges when it comes to listing. Swiggy is expected to raise around ₹11,000 crore, and with large IPOs, there’s always a risk of the listing not being as rewarding as expected.
If we take Zomato’s IPO as an example, the stock initially dropped after its listing, but later soared once the company showed profitability. This shows that profitability is the most crucial factor when it comes to long-term stock price movement.
Conclusion: Should You Invest in Swiggy’s IPO?
Swiggy’s IPO is an exciting opportunity, but it comes with its risks. The company’s lack of profitability is a significant concern for investors, and it may take some time before Swiggy turns profitable. If you choose to invest, keep a close eye on its performance and profitability in the coming years.
For now, Swiggy’s IPO might not bring huge listing gains, but in the long term, it could prove valuable if the company manages to overcome its financial challenges.
Final Thoughts
If you’re interested in IPOs, make sure to stay updated. We regularly cover IPOs like Swiggy’s and other exciting investment opportunities. Recently, we also covered Wari Energies’ IPO and will cover more in the future. So, if you haven’t already, make sure to subscribefor more updates on upcoming IPOs and stock market trends.
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