Swiggy's IPO scheduled for Wednesday will finally give many analysts a public exposure to a stock that rivals Zomato, which has long been considered India's internet stock. It will also test the public's appetite for IPOs worth more than $1 billion.
For its IPO, Swiggy has already secured $1.4 billion from institutional investors including Norway's sovereign wealth fund, BlackRock and eight of India's top 10 mutual funds. Still, the company is entering a public market where big tech stocks have historically struggled — three years after its $2.5 billion initial public offering, Paytm still trades 47% below its IPO price. has been done.
More than a dozen Indian tech startups have gone public in the past four years, but the market has shown little interest in large IPOs. Beauty and wellness e-commerce company Nykaa is still trading 53% below its opening price, and Star Health and Alliance Insurance Company remains 48% below its IPO price three years later. By comparison, startups that have raised less than $500 million in India are doing incredibly well.
India has emerged as a hotbed for tech IPOs this year, even as the US market remains weak. At the moment, all eyes are on Swiggy's IPO, especially as many growth-stage startups and their investors are eyeing similar big listings in the next 24 months.
Additionally, for many Indian startups that were based in the US and Singapore, moving their official headquarters back to India will allow them to better comply with local regulations when undertaking such IPOs . It's also an opportunity to take advantage of a market that has seen benchmark indices rise more than 10% over the past year. Up to 30 startups could return to India in the coming years, investors said.
A slide from venture firm WEH's presentation last week shows the market favors smaller IPOs. Image credit: TechCrunch
Prospects for Swiggy's IPO look good, especially considering rival Zomato's share price has soared more than 100% since its $1.3 billion listing in 2021, reaching a market cap of $29 billion this year. Swiggy, on the other hand, is seeking a valuation of $11.3 billion.
It also helps that India's food delivery market has long been dominated by Zomato and Swiggy. And what makes the offer even more attractive to investors is that Swiggy is among dozens of companies trying to disrupt India's $1.1 billion retail market, which is still dominated by millions of mom-and-pop stores. is.
Swiggy's Instamart is one of the top three quick commerce businesses in the country that promises delivery of groceries, wellness, beauty products and more within 10 minutes. It remains to be seen whether these companies can revolutionize India's broader retail market, but according to JPMorgan, they have already captured 56% of the online grocery delivery market from e-commerce companies. It is said that there is
Quick commerce companies like Instamart, Zomato's BlinkIt, Zepto, BigBasket and Minutes are changing consumer behavior in urban India, home to around 80 million people. TechCrunch estimates that the two companies are expected to have combined sales of more than $6 billion this year.
“I don't think Swiggy will be just an e-commerce company in the future, but given Instamart's growth rate and the overall target market that Instamart is targeting, I think the proportion of e-commerce in Swiggy will continue to rise.” to bring about change,” Swiggy co-founder and CEO Sriharsha Majety (pictured above, top) said in an interview with TechCrunch.
This business model is supported by a unique supply chain system with hundreds of individual warehouses, or “dark stores,” strategically located within a few kilometers of residential and commercial areas. This allows businesses to make deliveries within minutes of ordering.
This approach differs from that of e-commerce players such as Amazon and Flipkart, which own fewer but much larger warehouses in low-rent, remote areas.
Swiggy operates over 600 such establishments, while Zomato's Blinkit ended the September quarter with 791 stores.
Swiggy, which counts Prosus, SoftBank, Accel and Elevation among its backers, has expanded Instamart to 30 cities in India. However, many investors and analysts have expressed doubts about the feasibility of extending the quick commerce model to smaller cities and towns in India.
“Is there an operating model for city number 500? Honestly, I don't know,” Majetti said. When asked if this model would work in city number 75, Majetti replied: “Yes. We'll see City 75 make quick trades. ”
Swiggy's IPO will also show how willing investors are to bet on business models that prioritize growth over profits in a challenging global climate.
For Dutch investor Prosus, a Swiggy listing could result in a threefold return. It would also be the biggest hit for the Indian venture, whose more than $1 billion in profits from Byju have all but evaporated. Accel is expected to return more than 35x, making it one of the largest returns in the past five years.