Swiggy, India’s prominent food delivery platform, took a momentous step by filing its red herring prospectus (RHP) with the Registrar of Companies (ROC) in preparation for its initial public offering (IPO). This eagerly awaited public issue is set to open for subscription on November 6 and will conclude on November 8. With the IPO, Swiggy aims to solidify its position in the market and provide existing investors an exit route while raising funds for future growth.
IPO Structure and Financial Goals
Swiggy’s IPO is composed of two main components: a fresh issuance of equity shares valued at ₹4,499 crore and an offer-for-sale (OFS) of 17.5 crore equity shares by existing shareholders. This structure marks a strategic shift from its previously mentioned figures in the draft prospectus, where the fresh issue was originally set at ₹3,750 crore, and the OFS was higher at 18.5 crore shares.
Prominent investors backing Swiggy, including Prosus and SoftBank, are looking to capitalize on the growing demand for online food delivery services in India. The company aims to raise up to $1.35 billion (approximately ₹11,700 crore) through this IPO, with a targeted valuation of around $11.3 billion at the top of the price band, which is set at ₹390 per share.
Competitive Positioning in the Market
This anticipated IPO comes amid a competitive landscape dominated by Zomato, which currently holds a market valuation of approximately $26.7 billion. Swiggy’s valuation, which is less than half of Zomato’s, indicates the potential for significant upside if the company can successfully execute its growth strategy and capture a larger market share.
The IPO will be the second-largest in India for the year, following Hyundai Motor India’s ₹27,870 crore offering. The market’s reception of Swiggy’s IPO could set the tone for upcoming tech and food delivery IPOs, as investor appetite for these sectors remains robust.
Stakeholders and Shareholder Insights
The upcoming IPO will feature a range of selling shareholders, including prominent venture capital firms such as Accel India, Coatue PE Asia, and Tencent Cloud Europe. MIH India Food Holdings, an affiliate of Prosus, is the largest stakeholder, holding a 30.93% stake in Swiggy, followed by SoftBank’s SVF II SONGBIRD (DE) LLC at 7.75%. The support from these well-known investors reflects confidence in Swiggy’s growth potential and the overall food delivery market.
Additionally, the co-founders, Sriharsha Majety and Lakshmi Nandan Reddy Obul, hold 5.36% and 1.75% stakes, respectively. Their ongoing involvement in the company signifies a strong alignment of interests between management and shareholders.
IPO Allocation and Investor Opportunities
Swiggy has allocated a portion of its shares for employees, reserving 7.5 lakh shares specifically for them. The remaining net offer is divided into 75% for Qualified Institutional Buyers (QIBs), 15% for non-institutional investors, and 10% for retail investors. This allocation strategy is designed to ensure broad participation from various investor categories, thereby enhancing market stability and support.
The company intends to utilize a significant portion of the net fresh issue proceeds for strategic investments. Specifically, ₹1,343.5 crore is earmarked for its subsidiary Scootsy, while ₹703.4 crore will be directed toward technology and cloud infrastructure. An additional ₹1,115.3 crore is allocated for brand marketing and business promotion, underscoring Swiggy’s commitment to bolstering its market presence.
Financial Performance and Future Outlook
On the financial front, Swiggy has shown promising growth despite facing losses. For the fiscal year 2024, the company narrowed its loss to ₹2,350.2 crore, a marked improvement from ₹4,179.3 crore in the previous year. Revenue from operations surged by 36% to ₹11,247.4 crore, up from ₹8,264.6 crore. In the quarter ending June 2024, while the company reported a loss of ₹611 crore—up from ₹564 crore year-on-year—revenue continued to grow, indicating a robust demand for its services.
The IPO timeline indicates that the basis of allotment will be finalized by November 11, with equity shares credited to successful investors’ demat accounts by November 12. Trading on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) is expected to commence on November 13.
Swiggy’s IPO is a pivotal moment not just for the company but for the entire Indian startup ecosystem. As one of the most anticipated IPOs of the year, it reflects the growing investor confidence in the food delivery sector and the broader tech market in India. With strategic funding aimed at scaling operations, enhancing technology, and solidifying brand presence, Swiggy is poised to take advantage of the booming demand for food delivery services in the country. The coming weeks will be crucial in determining how this IPO shapes the future of Swiggy and its position in a competitive market landscape.
