Swiggy, India’s second-biggest food delivery app, is slimming down before its listing in Mumbai.
After bulking up to a $15 billion valuation in August, it’s going public at a much leaner $11.3 billion. Why? Well, no one wants to appear bloated in a market that’s cleaning up its act after a year of excesses.
Swiggy vs. Zomato
Swiggy also wants to outshine its big rival Zomato, which is getting ready for a second serving of shares itself. India is the world’s fastest-growing market for food delivery, with Zomato and Swiggy pretty much dominating the $44 billion business.
Coca-Cola and Pepsi. Airbus and Boeing. Sotheby’s and Christie’s. Zomato and Swiggy – you get the idea.
Swiggy’s going to want to attract those Zomato fanboys too, and it knows that a cheaper valuation is far more likely to whet investor appetite. The competition is fierce:
- Zomato has just become profitable, while Swiggy is far from it – last year, it posted losses of nearly $279 million.
- It’s been a cat fight for market share: Swiggy was the leader initially but lost to Zomato, declining from an around 60% share in 2018 to 45% now.
- Things are improving, though. Swiggy’s revenue rose 97% in the financial year ending March 2023.
- Losses for this period came down by 36%.
Hyundai mares
Even though Swiggy is doing its best to look good for investors, Hyundai India’s flop listing last week might be giving it some sleepless nights. Retail investors aren’t just buying any household name that comes up anymore.
Some red flags to consider: two-thirds of the money raised is going to Swiggy’s founders or early-stage investors. Prosus, its largest investor, is cutting its stake by half. Also, Swiggy has seen an exodus of C-suite executives in the past year.
But unlike Hyundai, where all the cash raised was heading for Korea, Swiggy will use some of its purse to repay debt and the rest to expand its network and technology.
What next?
Swiggy needs to get cracking on its quick-commerce business, which could be its biggest driver to potential profitability. Delivering groceries in 10-15 mins is the holy grail, one that got Zomato to $$$$.
So, if you are keen on quick commerce, then this IPO is a good one to load up on and keep until Swiggy gets good at it. Until then, the valuation cut has potentially made some room for Swiggy to put on a good showing when it debuts next month.
