Swiggy Vs Zomato: Food Giant Gears Up For Rs 10,400 Cr IPO; From Financials To Challenges, A Comparison

Swiggy, one of the country's leading food and grocery delivery platforms, gears up for one of the largest and most anticipated IPOs of the year. The Securities and Exchange Board of India (SEBI) has recently given the green light to Swiggy's updated Draft Red Herring Prospectus (DRHP), paving the way for this new-age IPO that is expected to raise Rs 10,414 crore ($1.25 billion).

The Total IPO Size

Swiggy's upcoming IPO is expected to raise a total of Rs 10,414 crore (approximately $1.25 billion), making it one of the largest IPOs in India this year. The IPO consists of two components: the fresh issuance of shares and an Offer for Sale (OFS) by existing shareholders.

Swiggy plans to raise Rs 3,750 crore (around $450 million) by issuing fresh shares. Existing shareholders, including major players like Prosus and Accel India, are set to sell around 18.53 crore shares via offer for sale (OFS), contributing Rs 6,664 crore (about $800 million) to the total IPO size.

Notably, Swiggy has the option to increase the offer size by an additional Rs 1,250 crore ($150 million), potentially raising the total IPO size to Rs 11,664 crore ($1.4 billion). This decision will be finalized during the company's Extraordinary General Meeting (EGM) scheduled for October 3.

How Swiggy Plans to Use the IPO Proceeds?

Swiggy has laid out a clear plan for how it intends to utilize the funds raised through the IPO. If the company successfully raises Rs 3,750 crore through fresh share issuance, the proceeds will be directed toward several key areas:

Quick Commerce Expansion (Instamart): Rs 982 crore will be allocated to expanding Swiggy's quick commerce business, Swiggy Instamart. As the market for quick commerce continues to grow, this investment will help Swiggy strengthen its position against competitors like Zepto, Blinkit, and Tata BigBasket.

Brand Marketing and Business Promotion: Another Rs 930 crore will be used for brand marketing and promotional expenses to enhance Swiggy's brand visibility and awareness.

Technology and Cloud Infrastructure: Swiggy will invest Rs 586 crore in enhancing its technology and cloud infrastructure.

Debt Repayment: A sum of Rs 137 crore will be used to pay off the company's existing debt.
General Corporate Purposes and Potential Acquisitions: The remaining Rs 1,115 crore will be allocated for general corporate purposes, including the possibility of funding future acquisitions.

Who's Selling Their Stake?

Several high-profile investors are set to dilute their stakes in Swiggy as part of the IPO. These include, Prosus (MIH India Food Holdings BV), Accel India, Alpha Wave, Coatue PE Asia, DST Global, Elevation Capital, Norwest Venture Partners, and Tencent.

Of the 18.53 crore shares up for sale, Prosus, an Amsterdam-based investor, is the largest contributor, selling 11.78 crore shares, which accounts for nearly 64% of the OFS component. As the single largest shareholder in Swiggy, Prosus must reduce its stake to below 25% at the time of listing to avoid being tagged as the promoter. Notably, Prosus has been gradually reducing its stake, which stood at 30.95% at the time of filing the updated DRHP.

Who's Staying Put?

While many major investors are cashing in, one notable investor-SoftBank Vision Fund-has chosen not to sell its shares as part of the OFS. This decision indicates that SoftBank sees potential for Swiggy's future growth and is likely waiting for an opportunity to offload shares at a higher price once the company's value appreciates further.

Valuation

Swiggy aims to achieve a market valuation of around $10-13 billion at the time of its listing. This valuation, while impressive, is still significantly lower than that of its arch-rival Zomato, which currently boasts a market capitalization of approximately $25 billion. The exact valuation will be determined by the price band, which will be finalized after roadshows and meetings with bankers.

Financial Performance

Swiggy's financial performance has shown significant improvement in recent quarters, although it still trails behind Zomato in terms of profitability and revenue.

Swiggy's revenue for Q1FY25 stood at Rs 3,222.2 crore, marking a 35% increase from Rs 2,389.8 crore in the same quarter last year. For FY24, Swiggy reported a revenue of Rs 11,247 crore, up by 36% from Rs 8,265 crore in FY23.

While Swiggy reported losses of Rs 611 crore in Q1 FY25 (up 8% from the Rs 564 crore loss in the year-ago period), it managed to reduce its full-year losses to Rs 2,350 crore in FY24, a 44% improvement from the Rs 4,179 crore loss reported in FY23.

In comparison, Zomato posted a revenue of Rs 12,114 crore for FY24 and generated a profit of Rs 351 crore..

High-Profile Investors

Swiggy's IPO has attracted attention from several high-profile personalities who have acquired shares ahead of the public offering. According to reports, approximately 2,00,000 shares have been purchased by notable figures such as cricketers, Rahul Dravid and Zaheer Khan, tennis player, Rohan Bopanna, filmmaker, Karan Johar, and actor-entrepreneur, Ashish Chowdhry. In previous funding rounds, Bollywood icons Amitabh Bachchan and Madhuri Dixit Nene, along with Innov8 founder Ritesh Malik, also invested in Swiggy.

Swiggy Vs Zomato

The upcoming IPO sets the stage for a fierce battle between Swiggy and Zomato as they vie for supremacy in India's burgeoning food-tech and quick-commerce markets. While Swiggy has made strides in closing the gap with Zomato, the latter still holds a stronger market position, with a market capitalization of nearly $25 billion.

Zomato's diversified revenue streams, which include its B2B Hyperpure and Blinkit quick-commerce verticals, have contributed to its impressive growth. Meanwhile, Swiggy's foray into quick commerce through Instamart, coupled with the capital raised from the IPO, may provide the necessary momentum to challenge Zomato's dominance.

What's Next for Swiggy?

Swiggy's IPO represents a pivotal moment for the company and could be a game-changer in its battle against Zomato. The fresh funds will enable Swiggy to expand its quick commerce operations, strengthen its technology infrastructure, and enhance brand visibility.

With Zomato already profitable and holding a substantial lead in market capitalization, Swiggy has its work cut out. However, the IPO could be the catalyst Swiggy needs to accelerate growth, gain market share, and ultimately close the gap with its rival.