Swiggy, a premier online food delivery platform in India, has transformed the way people order and enjoy food. Initially, the creators named Swiggy Bundl and designed it as an e-commerce platform to streamline courier services. Later, they changed its name and entered the food delivery market. 

Since its inception in 2014, the company has experienced exponential growth, becoming a dominant force in the food delivery industry. Swiggy’s user-friendly mobile app and extensive network of restaurants and delivery partners have enabled millions of Indians to have their favourite meals delivered right to their doorsteps. 

As the company continues to expand and diversify its offerings, it has attracted attention from investors and the stock market. In this article, we will delve into Swiggy’s history, business model, revenue streams, financial health, and the various factors that affect its performance. We will also discuss how to invest in Swiggy shares and explore alternative investment ideas.

Swiggy Company History

Swiggy was founded by Nandan Reddy, Rahul Jaimini, and Sriharsha Majety in 2014. The company started with just a handful of restaurants in Bengaluru and has since expanded to over 500 cities in India. The food aggregator has successfully raised multiple rounds of funding, with its latest round in January 2022 valuing the company at approximately $10.7 billion (₹87,589.57 crore). 

Over the years, Swiggy has ventured into new categories such as grocery delivery, cloud kitchens, and meat delivery further expanding its market presence – although the company has had to shut down its meat delivery business and sell its cloud kitchen venture since.

In May 2022, the online food-delivery app also penned an agreement with Times Internet to acquire Dineout, a restaurant tech and dining-out platform in a deal valued at ₹930 crore at the time. After the acquisition, Dineout continued operating as an independent app until Swiggy designated a separate section for the platform in February 2023.

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Swiggy Business Model and Revenue Streams

Swiggy’s primary revenue stream comes from commissions charged to partner restaurants for each order placed through the platform. The company also earns revenue from delivery fees charged to customers, which vary based on distance and order value. 

Additionally, the food app offers a subscription-based service called Swiggy One, which provides users with exclusive benefits such as free deliveries and priority customer support.

Swiggy One subscribers and free-tier users also benefit from access to Dineout. The food tech platform also earns a reported commission of up to 5% from restaurant partners listed on Dineout.

Swiggy Fundamentals

Swiggy has demonstrated strong financial growth since its inception, however, the company has not achieved profitability. The food tech giant continues to invest heavily in marketing, technology, and expansion but despite these investments, the company's losses haven’t quite diminished either. 

In FY22, Swiggy experienced a 2.2-fold increase in its gross revenue (GMV), reaching ₹5,705 crore. Fintrackr’s analysis reveals that the company’s losses also climbed 2.2 times, totalling ₹3,629 crore.

Risk Factors and Challenges

Swiggy’s direct rival in the food delivery market is Zomato. As of April 2023, Zomato’s market share has grown to 56%, while Swiggy holds 44% of the market share, largely due to Zomato’s successful loyalty program, Zomato Gold.

The company’s financial challenges include a widening gap in losses compared to Zomato. In FY22, Swiggy reported a 2.24 times increase in losses, reaching ₹3,628.9 crore, while Zomato’s losses stood at ₹1,098 crore during the same period. Swiggy’s expenses also rose significantly, contributing to the increased losses.

In addition to financial concerns, Swiggy has faced some setbacks in its business strategy over the past few months. The company recently laid off 380 employees and shut down its meat marketplace due to a lack of product fit. The food tech giant also chose to sell its cloud kitchen business, Swiggy Access, in a share-swap deal to cut down on cash burn.

Another key competitor that’s caught its rival Zomato’s attention too is the rise of Open Network for Digital Commerce (ONDC), the government's e-commerce platform. Although still in its pilot phase, the National Restaurant Association of India (NRAI) — India’s restaurant industry body working to end the Zomato-Swiggy duopoly — has shown massive support for the platform.

In addition to offering significantly lower commissions, ONDC provides partnered merchants and restaurants access to customer data when they order food. This helps them understand their target market, customer behaviour, and ordering patterns.

How to Buy Swiggy Share?

Currently, Swiggy is a privately-held company and its shares are not listed on any stock exchange. However, Swiggy is expected to go public in the coming years. To invest in Swiggy shares once they become available, follow these steps:

• Open a Demat and trading account with a registered broker.
• Complete the KYC process and fund your trading account.
• Keep an eye on Swiggy’s IPO news and subscribe to the IPO once it’s announced.
• After the allotment, the shares will be credited to your Demat account, and you can start trading Swiggy shares on the stock market.

IPO Plans and Timeline

Swiggy hasn't officially set a date, but the company is preparing for a public listing later this year, despite many Indian tech companies delaying their IPOs. With plans to be IPO-ready by September and file pre-IPO documents within 6-8 months, an Entrackr report states that Swiggy intends to list on the stock exchange after the third quarter of the 2024 financial year, following competitor Zomato. 

The food tech company also recently appointed three independent directors to its board, further indicating IPO preparations, and set a target to generate sizable profits from its food delivery segment to fund its grocery vertical, Instamart, without external capital.

Alternate Investment Idea: Competitors

While waiting for Swiggy’s IPO, investors can consider investing in shares of its competitors, such as Zomato, which is already listed on the stock market. 

Other companies operating in the food tech and delivery space include global giants like Uber Eats and DoorDash, as well as regional players like Grab and Deliveroo. Investing in these companies can provide exposure to the food delivery industry and potentially generate returns.

Market Share and Growth Potential

According to a recent HSBC Global Research report, Swiggy, with its core food delivery business led by former Oyo executive Rohit Kapoor, holds 46% of the market and surpassed rival Zomato in market share during October-December 2022. However, analysts predict that its market share may decrease to 43% by the end of the 2024 financial year. 

Despite this, Quadintel forecasts the online food delivery market to reach ₹1,51,517 crore in value by 2026, with a compound annual growth rate (CAGR) of 30.11% during the 2021-2026 period, indicating significant growth opportunities for Swiggy in the coming years.

Revenue and Profitability Projections

Swiggy reported a net loss of ₹3,629 crore over the course of the 2022 financial year, which is more than double its losses of ₹1,617 crore in the year before. The company heavily spent on marketing to boost revenues, which increased by over 120% from ₹2,547 crore to ₹5,705 crore. However, this top-line growth came at a steep cost.

The food aggregator struggled to reduce cash burn, with FY22 cash outflows from operations reaching ₹3,900 crore. Zomato, in comparison, reported operating revenues of ₹4,192 crore and lower losses of ₹1,203 crore.

Swiggy’s heavy investments extend to its quick commerce business, Instamart, which contributes 35% of annual revenues.

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Long-term Investment Prospects

Swiggy’s strong market position, growth potential, and improving financial health make it an attractive long-term investment prospect. However, investors should carefully consider the risks associated with investing in Swiggy, such as competition, regulatory changes, and the company’s path to profitability. By thoroughly analyzing these factors, investors can make informed decisions about whether Swiggy is a suitable investment for their portfolio.

In conclusion, Swiggy has emerged as a major player in the Indian food delivery industry, with a solid business model and promising growth prospects. While the company’s shares are not yet publicly available, interested investors should keep an eye on Swiggy’s IPO developments and consider alternative investments in the meantime. As with any investment, it is essential to carefully evaluate the risks and potential rewards associated with investing in Swiggy and make decisions based on one’s individual financial goals and risk tolerance.

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