Swiggy's Appetite for Success: A Comprehensive IPO Analysis

The article provides an in-depth look at Swiggy, highlighting its growth, strategic initiatives, and prospects. Swiggy's resilience in the competitive food delivery industry, coupled with innovations like Swiggy Super and Swiggy Access, positions it as a versatile player. As the company prepares for an IPO to raise substantial funds, its expansion into various cities and commitment to enhancing user experience stand out. The article expresses optimism about Swiggy's future, emphasizing the importance of navigating challenges and leveraging technological advantages for sustained success in the dynamic market.

Overview

Swiggy was launched in 2014 by Nandan Reddy and Sriharsha Majety. It is an online food delivery service that connects restaurants with customers who prefer to enjoy their meals at home. Swiggy dispatches its delivery personnel and utilises technology to provide real-time updates to customers regarding the location of their orders every second. The company's headquarters are located in Bangalore, operating in 25 cities across India. Swiggy has surpassed a market valuation of 10.7 billion dollars.

Nandan Reddy, Sriharsha Majety, and Rahul Jaimini founded the Bangalore-based start-up after graduating from India's top engineering universities, IIT Kharagpur and BITS Pilani, respectively.

Before the debut of Swiggy, Sriharsha Majety (Co-founder and CEO) and Nathan Reddy (Founder and CEO) spotted an opportunity in the unorganised logistics and shipping sector.

Drawing insights from past endeavours, the trio set out to find a venture that could be executed effortlessly with the push of a button. Observing the triumph of Ola and Uber, the three collaborators became intrigued and recognized significant possibilities within the hyperlocal industry. Strategising meticulously, they initiated their food delivery enterprise in 2014, deploying six delivery personnel to cater meals from 25 different establishments.

With limited success experienced by existing players such as Zomato and Foodpanda, industry experts foresaw Swiggy entering an already saturated market. To pose a formidable challenge to the established players, Swiggy, being a late entrant, had to formulate effective brand communication strategies that ultimately paved the way for its success.

The primary hurdle for Swiggy revolved around persuading restaurants to join its platform over competitors. Initially met with reluctance due to trust issues, Swiggy dedicated significant efforts to enhance its logistics network, making it faster, more efficient, and seamlessly integrated. This strategic move allowed Swiggy to differentiate itself in the online food delivery landscape.

Swiggy took on the task of organizing the previously unstructured food delivery industry. Recognizing the challenges faced by customers, such as prolonged delivery times from restaurants lacking operational efficiency, Swiggy addressed this gap. During its entry into the market, the existing food delivery options lacked proper planning, making Swiggy's presence akin to the cherry on top of the cake.

Swiggy suffered 65-fold losses in March 2016. Swiggy responded to this challenge by launching a cost-cutting programme in April 2016, while also strengthening its logistics network. Throughout 2017, strategic investments were made in core engineering, automation, data science, machine learning, and personalisation to better understand consumer needs and improve operational efficiency. Swiggy had expanded its reach to over ten cities by the end of December 2017, formed relationships with over 20,000 restaurants, and had an amazing balance sheet with over four million transactions per month.

Swiggy expanded its operational scope in 2018 by acquiring Scootsy, which allowed it to enter new business sectors such as grocery, apparel, stationery, and other critical commodities. In 2019, Swiggy was processing over 1.4 million orders each day, had added 45,000 agents to its delivery crew, cooperated with over 1,30,000 eateries, and had a presence in over 325 Indian cities.

Business model of swiggy

Swiggy's business model is based on its hyperlocal on-demand food delivery operations. Swiggy has used new technologies to bridge the gap between restaurant owners and customers.

Swiggy is an excellent example of how changing customer behaviour can be important to solve customer concerns. When online food delivery was not widely available, individuals had to go to the restaurant to make an order or utilise the restaurant's delivery service. Orders were normally placed by calling the restaurant directly, with delivery confined to a specific area. However, Swiggy has successfully addressed this constraint. Within a city zone, anyone can now order meals from any place, removing previous restrictions.

let's look at how Swiggy works -

Customer Segment: Swiggy has a sizable fan base due to its accessibility via both mobile applications and online. The website is designed for urban food fans who want the ease of purchasing food online from nearby restaurants. Swiggy's app offers large restaurant menus, giving foodies a variety of selections. The platform's user base has grown due to the addition of a more diverse client group.

Cost Structures: 

The outlays of food platforms encompass:

a. Employee remuneration,

b. Expenditures for sustaining application and website development,

c. Upkeep fees and Administrative costs,

d. Promotional and Branding Expenditures,

e. Dispute-associated returns, reimbursements, and other outlays, and

f. Establishment of a kitchen-base-like facility Revenue Model.

Key Partners: 

The essential collaborators of the food platform are:

a. Eateries and retail outlets: The primary key collaborators of Swiggy consist of the restaurants and shops featured on the application. These establishments, such as McDonald's and Burger King, desire to deliver their food directly to people's doorsteps, making them pivotal partners for Swiggy.

b. Delivery Service Providers: Delivery providers are individuals responsible for transporting food. They may be full-time, part-time, or freelancers seeking additional income.

Key Resources: 

The primary assets of the platform include:

a. Local Food Delivery Personnel

b. Collaboration with Restaurants and Shops

c. User-Friendly Mobile Application

d. Extensive Database of Customers and Restaurants

Value Propositions: 

Swiggy aims to deliver food or essential items in 30-40 minutes. The food delivery app specialises in delivering food with no minimum order policy and efficient online payment systems in place, including Paytm, and PhonePe. Swiggy created their mobile application with an easy-to-use user interface to gain the trust and confidence of their customers.

The revenue model of swiggy

Swiggy generates revenue through a variety of sources. In 2018, the meal delivery platform saw an increase in expenses due to deliberate attempts to expand its fleet, which now includes over 90,000 delivery executives. The total expenses increased to about Rs 865 crore, more than tripling from the previous Rs 350 crore. Here are Swiggy's six revenue streams:

Advertising : 

Swiggy offers two types of advertising: a. Brands can display banner ads on the website and app to promote their goods. Swiggy's mobile application allows eateries to highlight their listings in the 'top spots' area in exchange for a financial investment from them.

Commission :

Swiggy charges a commission for all orders placed at its partner eateries. The platform charges a commission ranging from 15% to 25% on each order.

Delivery Charges:

Swiggy charges clients a small delivery fee, ranging from Rs. 20 to Rs. 40, for each order. Charges may change depending on increasing order volume or extreme weather conditions.

Affiliate:

The company has partnered with major financial institutions such as Citibank, HSBC, and ICICI Bank. It gets revenue by selling credit cards.

Swiggy Super : 

Swiggy Super is a membership programme offered by Swiggy to its consumers that gives them unfettered access to free deliveries. Subscribers to this programme are free from surge pricing during times of heavy demand.

Swiggy Access:

Swiggy has introduced a cloud kitchen idea in which it provides kitchen spaces to restaurants in specific places where their chain does not already operate. According to reports, Swiggy plans to expand its cloud kitchen model by adding 30 eateries and 36 kitchens in four new cities. This growth is expected to generate around 25% of sales within two years.

Geographics

It operates in over 25 locations across India, including cities like Bangalore, Chandigarh, Chennai, Gurgaon Mumbai Ludhiana Kolkata Coimbatore Jaipur Hyderabad Lucknow Guwahati Indore Dehradun Kochi Mysore Delhi etc.

Industry research

The fast-increasing online food delivery business is a major player in India's e-commerce industry, with Bengaluru emerging as the largest regional market, accounting for about 30% of the total. Following Bengaluru are Delhi-NCR, Mumbai, and Hyderabad. In 2020, smartphone applications took the lead as the primary way of accessing online meal delivery platforms, with online prepaid methods accounting for over 80% of payments. Platform-to-customer delivery is the most popular service model in India, with the platform's delivery executives delivering a more dependable and accountable service. This type of delivery accounts for around three-quarters of the market. This method of delivery accounts for about three-quarters of the market.

Swiggy and Zomato are the major powers in Indian meal delivery, with a combined market share of more than 65%. The substantial rise of these industrial titans can be attributed to the continual expansion of their in-house delivery fleets. By October 2018, Zomato had grown its fleet to 74,000 delivery agents, with its logistics staff delivering an impressive 86% of orders, up from 26% self-delivery in January 2018. 

Both businesses are carefully growing into smaller towns and cities, aiming to add a new market every one or two days. Recognising the market's fierce competition, they are aggressively seeking fresh investment in 2020 to preserve their dominant positions, with Swiggy successfully obtaining USD 1 billion in December 2018.

The boom in smartphone penetration, aided by the availability of low-cost solutions, is expanding India's online food delivery client base. Increased internet access, driven by low-cost data rates, is a substantial market boost. The sector is rapidly expanding as major players expand their reach outside conventional metro areas to smaller towns and cities. The advent and expansion of delivery-only kitchens, which cater to areas with few restaurant and cuisine alternatives, has been a significant driver of growth in tier-2 and 3 cities. The industry's progress is bolstered by increased marketing initiatives from key players.

Platform incentives such as discounts and memberships are major drivers of consumer preference for online delivery platforms. Furthermore, greater finance and the expansion of self-owned delivery fleets by large firms help to propel the business forward.

The increased number of busy white-collar professionals searching for quick and easy lunch alternatives is propelling the industry forward. The growing number of women in the workforce, as well as the emergence of double-income households that prefer to dine out frequently, all contribute to the growth of India's online food business. Economic growth, combined with rising household incomes, is expected to drive the industry in the future years, with consumers dedicating a large amount of their spending to categories such as food, household, transportation, and communication. The growing population of young people with better disposable incomes will also have a significant impact on food consumption patterns and industry growth.

Promoters & shareholding pattern of swiggy

Institutional investors of swiggy

• Invesco - Jan 24, 2022 (Series K)

• Baron Funds - Jan 24, 2022 (Series K)

• Sumeru Ventures - Jan 24, 2022 (Series K)

• 360 One - Jan 24, 2022 (Series K)

• Axis Growth - Jan 24, 2022 (Series K)

• Sixteenth Street Capital - Jan 24, 2022 (Series K)

• Ghisallo - Jan 24, 2022 (Series K)

• Smile Group - Jan 24, 2022 (Series K)

• Segantii Capital Management - Jan 24, 2022 (Series K)

• Alpha Wave - Apr 05, 2021 (Series J)

• Qatar Investment Authority - Apr 05, 2021 (Series J)

• Prosus - Jan 16, 2018 (Series F)

• ARK Impact Asset Management - Apr 03, 2020 (Series I)

• INQ Holdings - Apr 05, 2021 (Series J)

• Motilal Oswal - Jan 24, 2022 (Series K)

• Lathe Investment - Apr 05, 2021 (Series J)

• Ghisallo Master Fund - Jan 24, 2022 (Series K)

• GIC - Apr 05, 2021 (Series J)

• Dovetail Investment Management - Jan 24, 2022 (Series K)

• Kotak Mahindra Bank - Jan 24, 2022 (Series K)

• Ghisallo Capital Management - Jan 24, 2022 (Series K)

• SoftBank Vision Fund - Apr 05, 2021 (Series J)

• Amansa Capital - Apr 05, 2021 (Series J)

• Accel - Apr 03, 2015 (Series A)

• Naspers - May 29, 2017 (Series E)

• Wellington - Dec 20, 2018 (Series H)

• Goldman Sachs Investment Partners - Apr 05, 2021 (Series J)

• SoftBank - Apr 05, 2021 (Series J)

• Carmignac - Apr 05, 2021 (Series J)

• Goldman Sachs - Apr 05, 2021 (Series J)

• Think Investments - Apr 05, 2021 (Series J)

• Samsung Venture Investment - Apr 03, 2020 (Series I)

• Tencent - Dec 20, 2018 (Series H)

• Mirae Asset Capital Markets - Apr 03, 2020 (Series I)

• Korea Investment Holdings - Apr 03, 2020 (Series I)

• Meituan - Dec 20, 2018 (Series H)

• DST Global - Jun 05, 2015 (Series B)

• Hillhouse - Dec 20, 2018 (Series H)

• Coatue - Jun 20, 2018 (Series G)

• Meituan Dianping - Jan 16, 2018 (Series F)

• Bessemer Venture Partners - Sep 16, 2016 (Series D)

• Harmony Partners - Dec 31, 2015 (Series C)

• Norwest Venture Partners - Jun 05, 2015 (Series B)

• Elevation - Feb 06, 2015 (Series A)

• Innoven Capital - Jan 09, 2017 (Venture Debt)

• RB Investments - Dec 31, 2015 (Series C)

Swiggy's board 

After collecting $1.25 billion, the latest fundraiser also sees increasing involvement from institutional investors in India and worldwide.

On January 24, 2022, Swiggy, India's top on-demand convenience platform, announced today that it has secured $700 million in additional investment led by Invesco. With this round swiggy doubled its valuation to 10.7 billion.

The total valuation of swiggy is $7.

Swiggy, with a face value of 1 INR, currently has a total of 2,165,335,043 shares outstanding. The company reported a total income of 6,119.8 crore INR and boasts a market capitalization of 84,231.53 crore INR, while the book value stands at 19.02 INR. Interestingly, the intrinsic value is calculated at -76,317,631 INR, and the earning yield is noted at -56.81%. In terms of cash flow, the operational cash flow is -3,900.4 crore INR, while the financing cash flow is a positive 13,634.1 crore INR.

Peer comparison of swiggy

Financials comparison of swiggy & zomato

Financials 

Swiggy's losses for the full fiscal year 23 totalled around $545 million, indicating an 80% rise from over $300 million in fiscal year 22.

Similarly, Prosus revealed that its revenue share in Swiggy increased by 40% to $297 million in FY23, implying that Swiggy's full-year revenue for FY23 will be over $900 million.

Although its slow growth rate, Swiggy's GMV remained much lower than that of its nearest competitor, Zomato. In its papers, Gurugram-based Zomato reported that its GMV increased to around $3.2 billion in FY23, up from around $2.7 billion in FY22.

IPO of Swiggy

Swiggy has appointed ICICI Securities and JP Morgan as lead managers for its impending IPO. The IPO is scheduled to occur shortly, most likely before the end of the fiscal year 2023. Swiggy intends to raise between $800 million and $1 billion through its IPO.

Statistics according to the company

Order Statistics:

Swiggy had 6,64,46,312 unique dishes on its menu across the country.

Notably, 5028 users searched for 'Swiggy' on Swiggy, and 1682 users searched for 'order' without finding anything.

User Highlights:

A user from Mumbai placed food orders worth ₹42.3 lakh.

Maximum orders came from users in Chennai, Delhi, and Hyderabad, with more than 10,000 orders each.

The biggest party host from Jhansi placed an order with 269 items.

Food Preferences:

Gulab Jamuns outshined Roshogollas with over 7.7 million orders during Durga Pujo.

Masala Dosa was a top favourite in veg orders for all nine days of Navaratri.

Biryani continued to be the most-ordered dish for the eighth straight year, with India ordering 2.5 biryanis per second in 2023.

Healthy Choices:

Orders for sugar-free desserts on Swiggy Guiltfree exceeded 2.1 million.

Vegan orders on Swiggy Guiltfree saw a significant rise of 146%.

Millet-based dishes witnessed a 124% growth in orders on Guiltfree.

Savings and Memberships:

Swiggy One and One Lite users saved over ₹900 crores in 2023.

Swiggy Dineout users saved ₹300 crores.

Swiggy Instamart:

Swiggy Instamart delivered the fastest in Delhi, with a packet of instant noodles delivered in 65 seconds.

In September 2023, Swiggy Instamart introduced the bag opt-out feature, resulting in close to a million eco-friendly deliveries in two months.

Delivery Partners:

Swiggy's delivery partners covered an impressive 166.42 million green KMS using electric vehicles (EVs) and cycles.

Notable delivery partners include Venkatasen from Chennai, Santhini from Kochi, Ramjeet Singh from Gurgaon, and Pardeep Kaur from Ludhiana.

Miscellaneous:

Swiggy revealed insights and statistics as part of the 'How India Swiggy'd' recap for 2023.

The data covers millions of food, grocery, and on-demand transactions across India from January 1 to November 23, 2023.

Conclusion

Swiggy looks to be well-positioned for future development and expansion. Swiggy has a solid foundation in the online food delivery market and has shown adaptation and durability over the years. Strategic measures, such as investments in core engineering, automation, data sciences, and machine learning, have not only helped the company overcome initial obstacles but have also enhanced its logistical infrastructure. Swiggy's expansion into new business categories, like food and critical commodities, demonstrates a proactive commitment to meeting changing consumer demands.

Swiggy's development into other locations, along with significant relationships with a large number of eateries, demonstrates a comprehensive market presence. The company's potential to process about 1.4 million orders per day by 2019 and expand its delivery crew to 45,000 agents demonstrates a rising user base and operational efficiency. Furthermore, Swiggy's unique products, such as Swiggy Super and Swiggy Access, reflect a dedication to improving customer experience and exploring new income streams.

While the approaching IPO is expected to be a watershed moment, the company's intentions to raise big capital suggest lofty goals for future initiatives. However, the success of the IPO and the ensuing market reaction will be critical in deciding Swiggy's financial resources for growth. As with every firm, there are inherent hurdles, such as the industry's competitiveness and probable economic volatility. Swiggy will need to exploit its technology advantage, customer-centric strategy, and agility to stay ahead of the competition in this dynamic industry.

Finally, Swiggy's story exemplifies a combination of creativity, adaptation, and smart growth. Given the company's strong market position, technical developments, and efforts to expand its service offerings, its future growth prospects look to be positive. However, the success of its IPO and its ability to overcome future hurdles will be critical in defining Swiggy's growth trajectory and long-term viability in the competitive market.

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