Swiggy shares rose 7% to Rs 440 on Wednesday as the food delivery and quick commerce startup completed India's second-largest IPO this year. It was a high-profile debut that drew direct comparisons to Indian internet stocks, which analysts had long considered a benchmark. : Zomato.
The 10-year-old Bengaluru-headquartered company's listing is a milestone for India's startup ecosystem, with several companies eyeing similarly large initial public offerings in the next 24 months. It will also be a major liquidity event for Swiggy's backers, including Prosus, SoftBank and Accel, whose paper returns have already reached $2 billion. Approximately 5,000 employees could have a combined wealth of approximately $1 billion.
In the lead-up to the IPO, Swiggy valued its company at $11.3 billion, a fairly modest number considering rival Zomato's recent market capitalization of $29 billion. Swiggy co-founder and CEO Sriharsha Majety said in an interview that the company wants to make the service exciting for new investors. Zomato's share price has also fallen 8% this month as foreign institutional investors continue to sell billions of dollars of Indian stocks. On Wednesday, Swiggy's market capitalization jumped to $11.6 billion.
“One of the things I'm most excited about is that Swiggy itself is happening at a great time,” he said in a speech on Wednesday. “If you look at the next 10 to 20 years, I think it will be India's next 20 years. There is huge economic growth in front of us. Indian pride has never been higher.”
Swiggy enters the public market at a pivotal time for India's digital commerce landscape. Although it has established itself as India's second-largest food delivery platform with 14 million monthly active users, it lags behind market leader Zomato in key metrics. According to Macquarie research, the total annual order value for food delivery is $3.3 billion, about 25% behind Zomato.
The gap is even wider at Quick Commerce, a quick-delivery arm that promises grocery delivery in 10 minutes. Swiggy's Instamart service operates through a network of over 550 dark stores and has 5.2 million monthly users, while Zomato's Blinkit has 7.6 million. What's even more concerning for potential investors is that Blinkit has reached breakeven on adjusted EBITDA, while Instamart continues to lose money at the contribution margin level.
“We believe that each of Swiggy's business segments can receive lower target valuation multiples compared to Zomato's business segments due to poor past execution and widening market share differentials,” JMFinancial analysts said on Wednesday. said.
However, there are great opportunities going forward. Morgan Stanley estimates India's quick commerce market to reach $42 billion by 2030, accounting for more than 18% of the country's total e-commerce market. The sector has already grown at a blistering 77% annually since its pandemic-era launch, far outpacing traditional retail's 14% growth.
JPMorgan reports that quick commerce platforms have already captured 56% of online grocery deliveries from traditional e-commerce companies.
However, competitive pressures are intensifying. Traditional retail giants like Flipkart and Reliance's Jiomart have started their own expedited delivery services. Questions remain about the feasibility of quick commerce models beyond metropolitan centers, given their reliance on dense networks of small warehouses.