Swiggy IPO Highlights: Issue got subscribed 12% on Day 01

"In FY24, Swiggy reported a revenue of Rs 3,222.2 crore, growing 34.8% YoY, and negative PAT stood at Rs (611 crore). The company’s growth strategy faces notable challenges. While it aims to expand services and partnerships, reducing discounts may impact customer loyalty, and relying heavily on advertising and premium offerings might not be sufficient to drive profitability. Despite efforts to improve operational efficiency, the intense competition and current negative financial metrics raise concerns about long-term viability," said Arihant Capital in an IPO note.

"The company’s expansion into Tier 2 and Tier 3 cities, along with its inclusion of groceries and medicines, bolsters its path to profitability. Given its consistent innovation and strategic expansion, we believe Swiggy’s is well-positioned for sustained growth. Making it a compelling opportunity for investors seeking exposure in the evolving hyperlocal commerce space. Hence, by looking at all attributes we recommend investors to “Susbcriber” the Swiggy for long term perspective,” said Rajan Shinde, Research Analyst at Mehta Equities.

The general slowdown in global economic activities will dampen the company's growth too. It has experienced net losses annually since its incorporation. The dependency on numerous third-party providers for various operational aspects, including payment gateways and supply chain management and a lot of competition in the industry.

"Swiggy's strategic focus on hyperlocal commerce positions it as a key player in the sector, driven by an innovation-led culture. With a consistent rise in Average Order Value (AOV) and a growing network of Dark Stores from 301 in FY22 to 523 in FY24, the company is well-equipped to enhance user engagement and operational efficiency. As of June 30, 2024, Swiggy reached 112.73 million users, demonstrating robust growth supported by a unified app experience that simplifies diverse service offerings. The expansion of dark stores coupled with the introduction of non-grocery categories, aims to boost basket sizes and fulfil increasing consumer demand," said Deven Choksey Research in an IPO report.

"Swiggy's customer-centric approach, characterized by high transaction frequency and a personalized user experience, ensures strong retention rates and a widening gap in Monthly GOV (gross order value) per MTU (monthly transacting users). Given these strengths and the projected growth of the online food delivery and Quick Commerce markets, Swiggy is poised for sustained growth. At the upper price band, the company is valued at 8x Price to Sales, offering a 76% discount to its competition. Hence, we assign a ‘Subscribe’ rating," said KR Choksey Research in an IPO note.

Swiggy’s approach of an integrated app offering against Zomato’s multi-app approach helps it innovate faster. Their platform can be used to make restaurant reservations (Dineout) , events bookings (SteppinOut), avail product pick-up/ drop-off services (Genie) and engage in other hyperlocal commerce activities (Swiggy Minis, among others). Although, Avg MTU is still higher for Zomato, Gross Order Value (GOV) per user is higher for Swiggy. This shows Swiggy’s customer cohorts are more mature and stickier compared to its peer.

"Swiggy, at an upper price band of Rs 390.0, is valued at Price/Sales, EV/Sales and P/BV multiple of 7.8x/7.3x/7.1x respectively of its FY24 financials on post-issue capital. While comparing with Zomato, the issue appears to be fairly priced on all these parameters. We recommend investors to subscribe to the issue for a long-term investment perspective," said SBI Capital Securities in an IPO note.