As Indian food delivery platform Swiggy prepares for its much-anticipated IPO, all eyes are on how it compares to arch-rival Zomato, which went public in 2021. Both companies have been competing aggressively for market dominance in the rapidly growing food delivery and quick commerce spaces in India.
Swiggy is planning to raise between $1 billion to $1.2 billion (₹8,250 crore to ₹9,900 crore) through its IPO, aiming for a valuation of around $10-$12 billion (₹82,500 crore to ₹99,000 crore). The company will offer a fresh issue of shares worth ₹3,750 crore and an offer for sale from existing shareholders. Swiggy has seen its valuation jump from $5.5 billion (₹45,375 crore) in 2020 to nearly $10.7 billion (₹88,275 crore) in 2022 after raising over $1.25 billion (₹10,312 crore) from investors like Invesco, Qatar Investment Authority, and Baron Capital Group. Swiggy IPO is expected to attract significant investor interest given the market leadership in food delivery and promising growth prospects.
Zomato went public in July 2021 with a market cap of nearly $13 billion (₹1,07,250 crore). Since then, its market cap has surged to around $29 billion (₹2,39,250 crore) as of early 2023. Here's how Swiggy stacks up against Zomato across key metrics:
Financial performance
Market share
While Swiggy has tremendous growth potential as it heads into its IPO, the company faces the challenge of competing against Zomato's established market leadership.
On the financial front, Swiggy has shown substantial improvement. In FY24, it reduced losses by 43% and achieved a 26% year-over-year growth in Gross Order Value (GOV) for its quick commerce business. This financial progress, coupled with strategic expansions and innovations, positions Swiggy well to leverage IPO proceeds for further growth.
Swiggy needs to strategically leverage the proceeds from its IPO to narrow the gap in market share with Zomato. Expanding its services into new segments and cities will be vital. Swiggy also needs to accelerate Instamart to compete more strongly with Blinkit in quick commerce. This can be done by expanding its network of dark stores, optimising logistics for faster delivery, increasing its product range, and enhancing customer engagement through strategic partnerships and technology integration.
The intensifying competition between Swiggy's Instamart and Zomato-owned Blinkit is crucial for both companies. While Blinkit is projected to outpace Instamart in FY25 due to its higher monthly transacting users, superior average order values, and more efficient operations, Swiggy holds certain advantages that can help bridge the gap. Despite the narrowing difference, Swiggy's Gross Order Value (GOV) per Monthly Transacting User (MTU) remains ahead of Zomato's, highlighting a strong potential to capitalise on the market.
Swiggy's strength lies in its commitment to innovation. The company's integrated app strategy has facilitated the development of Instamart and led to the introduction of pioneering initiatives like Bolt, a 10-minute food delivery platform. This focus on innovation ensures that Swiggy remains at the forefront of food delivery and quick commerce, providing a competitive edge. By leveraging Bolt and similar strategies, Swiggy can accelerate Instamart's expansion and boost order volumes, which are critical to winning the quick commerce race.
Moreover, Swiggy can enhance customer loyalty and operational efficiency through gamification. Both Swiggy and Zomato employ gamification systems to motivate delivery riders, which not only adds an element of fun but also improves customer satisfaction and efficiency. This strategy can be pivotal in maintaining high engagement levels and optimizing operations.
Swiggy and Zomato have both expanded into the dine-out sector as well. Swiggy's acquisition of Dineout allows users to make reservations and enjoy discounts at over 18,000 restaurants across 24 cities, including major hubs like Delhi NCR, Mumbai, and Bengaluru. Meanwhile, Zomato offers dining offers, especially for Gold members, with contactless dining options, including digital menus and payments through Zomato Pay.
Key reports point out that Zomato's recent profitability gives it a key advantage over Swiggy in attracting IPO investors. Moreover, Zomato has astutely acquired start-ups like Blinkit to fortify its market position. In contrast, Swiggy is attempting organic growth, which can be more capital intensive.
Swiggy has evolved into a super app, integrating services like food delivery, quick commerce, meat delivery, and grocery under one platform. The advantage of this model is that it allows Swiggy to cross-sell services to its large user base. Customers seamlessly order food, groceries, medicines, etc. from one app. Operationally it optimises synergies in last-mile delivery across services.
However, Zomato's strategy of operating more focused vertical-specific apps could also be successful. Spinning off Blinkit as a standalone quick commerce app helps concentrate innovation in that space. Ultimately, the company that is able to execute its model most effectively and leverage cross-functional synergies will emerge ahead.
While Swiggy's super app strategy holds promise, some experts have expressed concerns regarding its scalability. Swiggy faces the dual challenge of excelling across diverse segments while also matching Zomato's scale and penetration in its core food delivery business.
Analysts argue that Swiggy needs to get its basics right in food delivery and quick commerce before diversifying into too many new areas. Moreover, the execution risks are higher given Swiggy's integrated model across multiple platforms. Any issues in one vertical could have spillover effects on other services.
One clear advantage Zomato has against Swiggy is Hyperpure, a business-to-business (B2B) platform providing ingredients directly to restaurants, cafes, and cloud kitchens. Hyperpure contributes to a major chunk of Zomato’s revenue. Hyperpure's farm-to-fork model is a game-changer for the restaurant industry. By sourcing ingredients directly from farmers and trusted suppliers, Hyperpure reduces reliance on intermediaries, ensuring fresher and higher-quality products at competitive prices. One of Hyperpure's key strengths is its integration with Zomato's technological infrastructure. The seamless order placement through the Zomato app simplifies procurement for restaurants already using Zomato's services. Hyperpure has demonstrated impressive growth metrics, with revenues doubling year-on-year. For Q3 FY24 alone, Hyperpure reported a revenue of ₹859 crore.
Swiggy has established itself as a major player in the Indian food delivery and quick commerce sectors. With a significant market share and robust revenue growth, Swiggy is well-positioned to capitalise on the growing demand for online food delivery services. The company has reported substantial increases in operating revenue, underscoring its capability to scale operations effectively.
Moreover, Swiggy has made significant strides in reducing its losses, demonstrating a commitment to improving financial health and moving towards profitability. The company's innovative use of technology, such as AI and data analytics, enhances customer experience and optimises delivery operations, maintaining its competitive edge over rivals like Zomato.
For long-term investors, Swiggy offers an attractive high-risk, high-reward bet on the future of food tech in India.
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