Financials, Strengths and Weaknesses of Swiggy IPO

Swiggy, the name synonymous with food delivery in India,is set to launch its highly awaited Initial Public Offering (IPO) from November 6 to November 8, 2024. The company aims to raise ₹11,327.43 crore through this IPO. As the company prepares to go public, investors are keenly eyeing its financial performance, strengths, and weaknesses to estimate its potential.

Financial Performance

Swiggy Limited showed significant financial improvement in the year ending March 31, 2024. The company’s revenue rose by 34% from ₹8,714.45 crore in FY 2023 to ₹11,634.35 crore in FY 2024, while profit after tax (PAT) saw a notable 44% increase, narrowing the loss from ₹4,179.31 crore to ₹2,350.24 crore. 

Although the company’s total assets decreased to ₹10,529.42 crore from ₹11,280.65 crore in the previous year, Swiggy’s net worth only slightly declined, reaching ₹7,791.46 crore by March 2024, compared to ₹9,056.61 crore in March 2023. 

However, reserves and surplus declined further, registering at -₹7,880.85 crore from -₹6,510.34 crore the previous year. Despite these challenges, Swiggy has kept its total borrowing relatively low, with a slight increase from ₹211.19 crore to ₹256.61 crore by June 2024.

Strengths: A Strong Foundation

Swiggy’s upcoming IPO highlights several strengths and growth opportunities, positioning it as a major player in high-frequency hyperlocal commerce. Since its founding in 2014 and expansion in 2020, Swiggy has pioneered innovation in food delivery and quick commerce. 

The company’s culture of innovation has driven the launch of diverse services, consolidating these offerings within a unified app that caters to both food delivery and quick commerce, enhancing user convenience. Swiggy has also scaled efficiently, with 557 active dark stores across 32 cities, optimising last-mile delivery speed. 

By leveraging a robust technology stack built for scalability, Swiggy ensures fast and reliable service. Partnerships are another key asset, with Swiggy collaborating with 2,23,671 restaurant partners as of June 2024, strengthening its position and reach across the food delivery ecosystem. 

This solid infrastructure, paired with an innovation-led approach, makes Swiggy well-positioned for continued growth in India’s dynamic and competitive market.

Weaknesses: Challenges Ahead

Swiggy IPO faces several risks and challenges that potential investors should consider. The company has consistently incurred net losses and negative cash flows since its establishment in 2014, raising concerns about its path to profitability. Revenue growth may also be at risk due to fierce competition and high operational costs, which could impact margins. 

In FY2024, Swiggy spent 16.46% of its revenue on advertising, a substantial expense that may strain profitability if not managed efficiently. Additionally, Swiggy’s reliance on a large workforce of 4,57,249 delivery partners brings risks related to retention; difficulties in maintaining this workforce could disrupt service efficiency. 

Strikes and disputes among delivery partners further pose a threat, potentially affecting continuity of service and increasing operational costs. Managing 557 active dark stores is another critical challenge, as inefficiencies could lead to higher operating expenses, impacting Swiggy’s overall financial performance. These factors collectively underscore the operational and financial challenges Swiggy may face post-IPO.

Conclusion

Swiggy’s IPO is undoubtedly a significant event in the Indian startup ecosystem. However, investors must carefully weigh the risks and rewards before investing. The company’s high valuation, coupled with its ongoing losses, raises concerns about its long-term sustainability.

Ultimately, the success of Swiggy’s IPO will depend on various factors, including its ability to sustain growth, improve profitability, and navigate the competitive landscape. As the company prepares to embark on this new chapter, investors and industry experts will be closely watching its performance.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.