Full Detailed Review of Swiggy IPO

Detailed Review of Swiggy IPO

A Competitor of Zomato which is coming at really cheap valuations

Read till the End for Complete Understanding and Verdict

Business Overview

Swiggy is a Well Known Platform which provides its users with Food Delivery, Quick Commerce Facilities (Swiggy Instamart), DineOut & Event services, Product Pick up/drop off services (Genie) etc

Swiggy is like a Super App which provides all above services inside a single app, company has recently launched membership program called "Swiggy One" which gives Free deliveries and other benefits to the membership holders across segments

Swiggy also provides B2B services like supply chain distribution services to wholesalers and Retailers

Segment wise Revenue (FY24):

Food Delivery: 49.3%

Quick Commerce: 9%

Dineout & Events: 1.3%

Platform Innovations: 1.7%

Rest other

As on June 30 2024, Swiggy Platform has 1.6 Cr Monthly Transacting users and around 57 lac Swiggy One Membership holders

Company has 2.23 Lac Restaurant Partners across country and they have more than 605 Dark Stores across 43 cities in India for carrying out Quick Commerce operations

Till now around 11.2 Cr people have used Swiggy Platform, Company has 4.57 lac monthly transacting Delivery partners

Let's Breakdown Some Major Businesses of Swiggy:

▫️Food Delivery Business:

Swiggy processed more than 57.7 Cr Food delivery orders in FY24

In FY24, Company posted Gross Revenue of 6,081 Cr and their AOV (Average Order Value) was 428

Their Contribution margin was 5.72% and their Food Delivery Segment faced EBITDA loss of 47 Cr

But over the years their Contribution Margin is improving significantly and Food Delivery business achieved EBITDA positivity of around 58 Cr in Q1FY25

▫️Quick Commerce Business:

Swiggy was the first platform to introduce Quick Delivery services in India (Not 10 Mins Delivery)

Swiggy processed more than 17.5 Cr Quick Commerce orders in FY24, contribution margin was -6%

In FY24, Company posted Gross Revenue of 1,087 Cr and their AOV (Average Order Value) was 460

Instamart platform gave EBITDA losses of 1,309 Cr

This business is growing with 196% CAGR from last 2 years

▫️Dine out and Events Business:

Contribution margin was 2.45% and this segment gave EBITDA loss of 173.5 Cr

As of June 30, 2024, the company employed 5,401 people

IPO Objects of the Issue

There is an OFS of 6,828 Cr

Out of 4,499 Cr Fresh Issue,

1⃣ Debt Repayment: 164.8 Cr

2⃣ Investment for Dark Stores: 1,178.7 Cr

- Company will use this amount to open new dark stores in existing as well as new cities, this money will be used till completion of FY28

- This Investment will be made in company's Material Subsidiary, Scootsy Logistics Private Limited

Company will be using 755 Cr till FY28 for opening 741 new dark stores

Rest of amount will be used for making lease rental payments of the dark stores

3⃣ For Promotional Expenses: 1,115.3 Cr

- Swiggy will mostly use this money for acquiring new customers for their Quick commerce business since their food deliver business is already well known and Average Acquisition cost is coming down

4⃣ Investment in Tech & Cloud infrastructure: 703.4 Cr

5⃣ For Funding inorganic growth through unidentified acquisitions and GCP: 1,336 Cr

- Company has not given exact details about what acquisitions it will make

Company KPIs (FY24)

Revenue: 11,634 Cr, Loss: 2,350 Cr, Borrowings (June 2024): 256 Cr

Financials

Swiggy is a Loss making company and they have burnt cash till now

But they are reducing their losses

In Q1FY25, Their Food delivery business has turned EBITDA positive so path of Profitability is looking bright from here

But Surely Profitability will take some time

Valuations (FY24)

Swiggy is coming at very Attractive Valuations. For proving this point, I will compare Swiggy with its Listed Peer Zomato Ltd

I am considering three main segments of both companies for comparison. Let's check data first

💠Zomato 💠

Market cap: 2,25,512 Cr (As on 7th Nov)

Food Delivery Business

Adjusted Revenue: 7,792 Cr

Adjusted EBITDA: 912 Cr (2.8%)

👉Price to Sales: 29x

Quick Commerce (Blinkit)

Adjusted Revenue: 2,301 Cr

Adjusted EBITDA: -384 Cr (-3.1%)

👉Price to Sales: 98x

Going Out Business (Dine out & Events)

Revenue: 258 Cr

Adjusted EBITDA: -6 Cr (-0.2%)

💠Swiggy 💠

Market cap: 87,298 Cr (On IPO price)

Food Delivery Business

Gross Revenue: 6,081 Cr

Adjusted EBITDA: -47 Cr

👉Price to Sales: 14.35x

- It is almost 50% cheaper than Zomato's Food Delivery Business

Quick Commerce (Swiggy Instamart)

Gross Revenue: 1,088 Cr

Adjusted EBITDA: -1,309 Cr

👉Price to Sales: 80.2x

- It is 18-20% cheaper than Blinkit

Going Out Business (Dine out & Events)

Revenue: 157 Cr

Adjusted EBITDA: -173 Cr

If we consider combined Price to Sales of both companies (FY24), Zomato is 18.6x and Swiggy is 7.5x

So overall, Swiggy is coming 60% Cheaper than the Valuations of Zomato

But it is better to compare them segment wise since both Swiggy and Zomato have other business also which are not common. Refer my above calculated data for segment wise comparison

Even if we give some premium to Zomato for their better Operational Efficiency and early Operational Profitability, Still Swiggy is coming at really Attractive valuations

Additional Points

- Management & Promoters are Solid

- Anchor Book was Solid

- GMP is negligible

Risk Factor

The Biggest threat for Swiggy is competition, Zomato is Market leader with 58% market share in Food delivery space and Swiggy has 34% market share

In Quick commerce, competition is even tougher since Blinkit leads this segment with 40-45% share, Swiggy Instamart has 20-25% share and Zepto has 15-20% share

Many big players like Tata, Amazon, Flipkart, Tatas and even Reliance is either in competition or trying to enter in competition

Conclusion

Swiggy is a Fast Growing Trusted Brand. They are operating in industry where the scope of Growth is very high due to India Consumption Estimations for coming years

Food delivery Industry is expected to Grow with 17-22% CAGR and Quick Commerce Industry is expected to Grow with 60-80% CAGR for next 4-5 years

Swiggy has already proved their mettle in Food Delivery segment and they are still figuring out for Quick Commerce, their Expansion plans for Dark Stores can surely Boost their Growth in QComm as well

The Best past about this IPO is, Swiggy is coming at really Good Valuation and lots of scope left for investors

I am Applying with Full Force in this IPO ✅

I am personally considering this company for Long Term Holding and Reasonable listing gains

Safe players can take their decision based on QIB Subscription data, there is some risk involved due to negative market sentiments

You can Follow me @DS Trading Tech for such Valuable IPO Reviews and Content

(Note: This is my personal read about the Company, Post is shared for educational purposes only, DYDD before applying)

#SwiggyIPO #Swiggy #IPOAlert

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