The much-anticipated initial public offering (IPO) of Swiggy Limited, one of India’s major food delivery and online grocery service providers, opens today for public subscription. This IPO is expected to be one of the largest in India’s tech ecosystem this year..

IPO details and structure

Swiggy’s IPO, that will go through a book-building process, offers both fresh issues and an offer for sale (OFS) from existing shareholders. The fresh issue component includes equity shares aggregating up to ₹4,499 crore, which the company intends to use for strategic growth initiatives. Alongside, up to 175.08 million shares are being offered for sale by early investors, including prominent venture capital funds such as Accel India IV (Mauritius) Limited, Apoletto Asia Ltd, and Tencent Cloud Europe B.V. These investors stand to realise returns from their early support of Swiggy’s ambitious expansion in India’s food delivery sector.

Timeline and price band

The IPO is open for anchor investors as of November 5, with the bidding period for retail and other investors spanning from November 6 to November 8. The price band for the offer is ₹371-390.

Swiggy’s IPO marks its debut in the public markets, creating a potential path for other unicorns in India’s technology space. According to its Red Herring Prospectus, the shares will be listed on the NSE, which will serve as the designated exchange for this issue. This first public offer aims to unlock Swiggy’s valuation and provide a liquidity event for long-time backers.

Founding and evolution

Founded as Bundl Technologies in 2013, Swiggy has grown to dominate India’s online food and grocery delivery market. Its growth trajectory over the past decade is marked by a focus on user experience, expansion into smaller cities, and the launch of grocery delivery services via Instamart, which has become a core component of its diversified revenue stream. By merging digital convenience with traditional grocery shopping, Instamart has helped Swiggy gain an edge over competitors.

The Bangalore-based company also tapped into new revenue channels, such as Swiggy Genie, its logistics arm, which serves both individual and business needs for intra-city deliveries. This expansion into auxiliary services aligns with Swiggy’s vision of being a one-stop platform for on-demand needs.

Revenue model and financial overview

Swiggy generates revenue primarily through commissions on food orders and grocery sales, as well as delivery fees and advertisements on its platform. In its financials, Swiggy reported substantial revenue growth, attributed to increased adoption of online food ordering and a broadened service offering. According to recent filings, the company aims to leverage proceeds from the IPO to drive operational improvements, geographic expansion, and increased market share in competitive markets.

Risks and investor considerations

Swiggy’s IPO is set against a backdrop of heightened investor enthusiasm in India’s tech IPOs. However, prospective investors should note that, as per Swiggy’s Red Herring Prospectus, investments in tech IPOs carry certain risks, especially given the competitive nature of the food delivery industry and Swiggy’s current lack of profitability.

The prospectus highlights the challenges associated with customer acquisition costs, operational expenses, and maintaining a logistics workforce. As of June 2024, Swiggy reported no identified promoter, which may be a point of consideration for traditional investors seeking an identified promoter-driven company.

Another point for potential investors is the ongoing competitive pressure in the food delivery sector from Zomato, Amazon, and other entrants in quick-commerce. This competition implies significant ongoing investments in marketing and technology, which could impact its profitability.

Allocation and listing plans

As per regulatory requirements, 75% of the net offer will be available for Qualified Institutional Buyers (QIBs), including domestic mutual funds and international institutions. Non-institutional bidders (NIBs) will have access to 15% of the offer, with retail investors allocated 10%. Additionally, Swiggy is reserving 750,000 shares for eligible employees, giving them an opportunity to participate in the company’s future growth.

Swiggy’s listing on the BSE and NSE is expected shortly after the close of the IPO, providing an opportunity for public trading of Swiggy shares and opening the door for future fundraising through public markets. In recent years, BSE and NSE have increasingly become platforms of choice for tech unicorns, owing to growing investor interest in India’s digital transformation.

Use of proceeds

Swiggy plans to use proceeds from the fresh issue to strengthen its technology infrastructure, including investments in AI-driven user experience enhancements, logistics efficiency, and expanding Instamart. Part of the funds will also go toward potential acquisitions and partnerships, aimed at broadening Swiggy’s service offerings and accelerating growth.

Swiggy’s plans include investments in its logistics capabilities, enhancing its fleet of delivery personnel, and incorporating electric vehicles in key metropolitan areas to improve efficiency and reduce emissions. By improving operational efficiencies and lowering delivery times, Swiggy aims to enhance customer satisfaction and achieve a sustainable competitive edge.

The Swiggy’s is a tech IPO to watch, for investors. Online food and grocery delivery is a sector that is one of India’s fastest growing. However, given its current financial trajectory, investors are encouraged to weigh the prospects of long-term growth with the inherent risks of an evolving market landscape.

As Swiggy debuts on the stock market, it joins other Indian tech giants like Paytm, Zomato, and Nykaa. Whether Swiggy’s IPO meets the high expectations remains to be seen.

(This article was generated using AI and reviewed by a journalist)

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