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Industry : IT - Software

Swiggy Limited View all IPOs

Price Band

Rs 371 – Rs 390

Swiggy Limited is going public with a fresh issue and an offer for sale. The issue opens on 06th November 2024.

MOJO CALL

Why

MOJO CALL

Avoid

Neutral

Improving contribution margin

The company has successfully improved its contribution margin, which reflects revenue minus variable costs as a percentage of total order value. The margin rose from -1.17% in FY2022 to 2.81% in FY2024, and further to 3.65% in Q1 of FY2025. This improvement is due to enhanced synergies within the delivery ecosystem, increased user adoption and habit formation, and a growing number of repeat transactions that drive economies of scale.

Operating leverage may play out

The company has established the necessary infrastructure to serve its food delivery and quick commerce users, resulting in higher fixed costs in the past and present. However, this investment is now yielding results, allowing the company to rapidly improve its contribution from these businesses.

Negative cashflows from operation

The company has struggled to generate positive cash flows due to substantial cash burn in previous years. This was driven by significant discounts to attract customers, leading to higher customer acquisition costs, increased spending on brand promotions and advertising, and large investments in establishing dark stores.

Valuations

Based on TTM financials, the company is targeting a market cap-to-sales ratio of 7.2x, which is significantly lesser compared to its closest competitor, Zomato, which trades at market cap-to-sales of 13.8x. But this discount comes from the fact that the company is still loss making and hasn’t generated positive cashflows yet whereas its competitor has been to turn profitable. We believe the company has enough prospects to turn profitable. We, therefore, suggest subscribing to the issue.

Issue Details

Issue Opens	06th November 2024
Issue Closes	08th November 2024
Price Band	Rs 371 – Rs 390
Issue size (Upper Band)	Rs. 11327.43 Cr
Issue Type	FRESH ISSUE & OFFER FOR SALE
Market cap (based on upper band)	Rs. 87298.6 Cr
Sales- March 2024 (Rs./Crs)	11247.4 Cr
Net Profit - March 2024 (Rs./Crs)	-2350.2 Cr
Industry	IT - Software
Promoters	-
Lead Manager	Kotak Mahindra Capital, Citi Group, Jefferies, JP Morgan, BofA Securities, ICICI Securities and Avendus Capital

Objective of the Issue

Details

Objectives of the Issue Fresh Issue – Rs 4499 cr & Offer for Sale – Rs 6828.43 cr

The Objectives of the Offer are for:
1. Repayment/prepayment of all or certain borrowings of its material subsidiary, Scootsy – Rs 164.80 crore
2. Investment in a material subsidiary, Scootsy, for expansion of Dark Stores for the quick commerce business – Rs 755.40 crore
3. Investment in a material subsidiary, Scootsy, for making the lease/license payments of its Dark Stores – Rs 423.30 crore
4. Investment in technology and cloud infrastructure – Rs 703.40 crore
5. Brand marketing and business promotion expenses for enhancing the brand awareness and visibility of the company – Rs 1115.30 crore
6. Funding inorganic growth and general corporate purposes – Rs 1336.80 crore

List of Shareholders Selling Their Stake

Name	Type	Value of Shares (in Rs)	% of OFS
Accel India IV	Institutional Investor	412,33,55,340	6%
Apoletto Asia	Institutional Investor	66,16,36,560	1%
Alpha Wave Ventures	Institutional Investor	217,36,54,470	3%
Coatue PE Asia XI	Institutional Investor	151,53,11,070	2%
DST EuroAsia	Institutional Investor	219,24,50,520	3%
Elevation Capital	Institutional Investor	288,45,38,670	4%
Inspired Elite Investments	Institutional Investor	263,14,25,940	4%
MIH India Food Holdings	Institutional Investor	42,54,76,50,600	62%
Norwest Venture Partners VII	Institutional Investor	249,84,59,730	4%
Tencent Cloud Europe	Institutional Investor	246,76,24,770	4%

Business Operations

About Company

Swiggy is a new-age, consumer-oriented, technology company offering an easy-to-use application for ordering food, grocery and other household products online, making restaurant reservations, bookings events and availing pick-up/drop-off services through their delivery partners.

The company pioneered the food ordering industry in India with the its launch in 2014 and the quick commerce industry with the launch of Instamart in 2020.

The company also offers a membership programme which offers users a discount on their food orders as well as free delivery.

They have also tied up with HDFC Bank to offer co-branded credit cards where the users can avail huge discounts on food ordering using this card.

Segment Revenue Breakup

Revenue Breakdown:
Source	Q1FY2025	FY2024	FY2023	FY2022
Food Delivery	50%	50%	55%	65%
Out-of-Home consumption	1%	1%	1	-
Quick Commerce	12%	9%	6%	2%
Platform Innovation	1%	2%	4%	12%
Supply Chain & Distribution	36%	38%	34%	21%

Financials

Financial Overview

The company’s revenue grew by 97% between FY2022 and FY2024 and stood at Rs 11,247 crore for FY2024. The company recorded revenues of Rs 3,222 crore in Q1FY2025.

In FY2024, the company’s Return on Net Worth stood at (30.16%), improving from (46.15%) in FY2023.

For Q1FY2025, the operating loss for the company came down to Rs 347 crore, compared to Rs 487 crore in Q1FY2024.

On the contrary, net loss for the quarter increased to Rs 611 crore in the June 2024 quarter, from 564 crore in the June 2023 quarter. The loss margin has come down from to 18.96%, from 23.6% in the same period.

The company has failed to generate positive cash flows from operations (CFO) in the past 3 years. The company reported a negative CFO of Rs 1,312 crore in FY2024.

As of 30th June 2024, the company had a debt of Rs 912 crore (including lease liabilities).

Financial Performance (Rs/crore)

Rs./Crs	Q1FY 25	FY 24	FY 23	FY 22
Revenue	3222.2	11247.4	8264.6	5704.9
Net Profit	-611.0	-2350.0	-4179.3	-3628.9