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Swiggy, India’s leading on-demand delivery platform, recently made headlines with its highly anticipated Initial Public Offering (IPO) debut. The IPO, valued at Rs 11,327 crore, received a strong response, being oversubscribed by 3.59 times, driven largely by institutional interest. Swiggy’s shares began trading at a 7.7% premium on the NSE and a 5.6% premium on the BSE over the issue price range of Rs 371-Rs 390.
While the opening saw a positive start, the stock's recent closing price of Rs 454 on NSE, nearly 6% lower than the previous session, has left investors weighing their options. This article delves into Swiggy’s financial performance, growth strategy, recent stock market performance and provides insights on whether investors should consider buying.
Swiggy’s market debut on Wednesday was marked by excitement, as it opened at Rs 420 on the NSE and Rs 412 on the BSE, offering investors a premium on the IPO price. By the end of the day, Swiggy’s shares settled at Rs 454 on NSE and Rs 455.95 on BSE, representing a nearly 17% gain over the initial offering price.
However, on November 14th, Swiggy’s stock fell almost 6%, closing at Rs 454, indicating early volatility in investor sentiment. The stock traded within a range of Rs 418.60 to Rs 489.40, which is close to its high of Rs 489.40. Swiggy’s current market cap stands at Rs 964.1 billion, reflecting significant investor interest in the company’s growth prospects but also concerns regarding its profitability.
Swiggy’s recent financials show promising revenue growth but reveal significant challenges related to profitability. In FY2023, Swiggy reported a gross revenue of Rs 5,705 crore, a 40% year-over-year increase, with its core food delivery business and Swiggy Instamart contributing substantially to this growth. Instamart, Swiggy’s quick-commerce grocery delivery service, contributed over Rs 1,500 crore, indicating strong traction in the grocery sector.
Despite revenue growth, Swiggy has yet to achieve profitability. The company’s net income for the trailing twelve months stands at -Rs 23.97 billion, with a negative profit margin of 19.84%, due largely to high operational expenses. In FY2023, Swiggy’s operating expenses totaled Rs 7,280 crore, leading to a net loss of Rs 1,575 crore, a slight improvement from Rs 1,850 crore in FY2022.
The company's financial position is strengthened by its cash reserves of Rs 39.87 billion, which provides some buffer for future growth investments. However, a debt-to-equity ratio of 12.25% indicates that Swiggy will need to manage its capital carefully to balance expansion with profitability goals.
Swiggy’s success in the IPO reflects investor confidence in its diversified business model. The platform spans several verticals, including Swiggy Genie (parcel delivery), Swiggy Instamart (grocery delivery), and restaurant booking services through Dine Out. Swiggy also offers a loyalty program, Swiggy One, in addition to in-app payment options such as Swiggy Money, Swiggy UPI, and a Swiggy-HDFC Bank co-branded credit card.
This diversified portfolio has allowed Swiggy to spread its operational risks, attracting a broad customer base across different services. Instamart, for instance, has shown rapid growth, contributing significantly to Swiggy’s overall revenue. However, the quick-commerce and delivery sectors are competitive, and maintaining profitability remains a challenge, given the significant capital investment required to operate at scale.
In a gesture to honor the core of its operations, Swiggy’s market debut was celebrated with a nod to its “delivery heroes.” Two Swiggy delivery partners were invited to ring the opening bell at the NSE, symbolizing their contributions to the company’s journey. This was a strategic move to reinforce Swiggy’s brand as one rooted in people-focused values and customer-centric service, enhancing Swiggy’s public image on its IPO day.
Swiggy’s IPO marks a significant milestone in its growth trajectory, showcasing its appeal to investors and underscoring its potential within the on-demand delivery market. However, the company’s high operational costs and current lack of profitability necessitate a careful approach for potential investors.
While Swiggy’s diversified business model offers revenue growth potential, the company’s ability to manage expenses and improve profitability will ultimately determine its success. Investors are advised to weigh their risk tolerance and investment horizon carefully before deciding whether to buy Swiggy shares.
