Can Swiggy Overtake Zomato as India’s Food Delivery Leader?

The food delivery landscape in India has been an exciting battleground, with Swiggy and Zomato leading the charge. As Swiggy prepares for its highly anticipated IPO, the question on everyone’s mind is: can it topple Zomato’s dominance?

The Bengaluru-based food delivery giant plans to raise ₹3,750 crore (approximately $448.56 million) through its IPO, which will see both fresh issue and offer for sale for shares held by investors like Prosus and Accel. Zomato’s recent IPO success has paved the way for Swiggy IPO.

In this blog, we take a closer look at Swiggy’s financial performance, Zomato’s current position in the market, and what this IPO could mean for the food-tech sector in India.

Swiggy’s Financial Performance in FY24

Swiggy has shown significant improvement in its financial performance in FY24. According to its updated Draft Red Herring Prospectus (DRHP), Swiggy cut its losses by a substantial 43%, bringing them down to ₹2,350 crore. This reduction was largely driven by rapid growth in its core food delivery business and its Instamart quick-commerce platform. Swiggy’s revenue also saw a notable increase of 36%, reaching ₹11,247 crore in FY24, compared to ₹8,264 crore in FY23.

The company’s ability to significantly reduce losses while boosting revenue can be seen as a positive sign for potential investors. Swiggy’s performance in FY24 positions it as a growing force in India’s food-tech industry, particularly with its Instamart service, which has gained considerable traction in the quick-commerce market.

Zomato’s Current Position

Zomato, Swiggy’s biggest competitor, is currently enjoying a strong financial position. After its successful IPO in 2021, Zomato’s shares are currently valued at ₹274 (September 30, 2024 at 2:43 P.M.). Zomato’s stock market debut was widely regarded as a success, and the company has continued to build on its market dominance since then.

One of Zomato’s key strengths has been its large market share in the food delivery sector. While Swiggy has been making strides, Zomato remains the leader with a larger user base and wider geographical reach. Moreover, Zomato’s acquisition of Blinkit (formerly Grofers) has solidified its position in the quick-commerce space, a growing segment that Swiggy’s Instamart also operates in.

The Quick-Commerce Battle: Swiggy Instamart vs. Zomato Blinkit

One of the most exciting aspects of Swiggy’s IPO is the potential for it to strengthen its quick-commerce platform, Instamart. Swiggy was the first major player to dive into quick commerce in India, launching Instamart to deliver groceries and essentials in under 30 minutes. The service has grown rapidly and contributed significantly to Swiggy’s revenue growth in FY24.

Swiggy plans to allocate ₹982 crore from its IPO proceeds to expand Instamart by opening more dark stores, which are small warehouses designed for rapid deliveries. This expansion is crucial for Swiggy as the quick-commerce segment is heating up, with players like Zomato and Zepto competing for market share.

Zomato made a bold move by acquiring Blinkit, which now holds around 40% of the quick-commerce market. In comparison, Instamart has captured approximately 32%. Although Swiggy had an early lead in this space, Zomato’s Blinkit acquisition has levelled the playing field. 

Swiggy vs. Zomato

While Swiggy has made considerable progress in reducing losses and increasing revenue, it still faces a tough battle to catch up with Zomato’s market share. That said, Swiggy’s IPO presents an opportunity for the company to close the gap. The ₹930 crore earmarked for marketing and brand promotion indicates that Swiggy is ready to double down on capturing more market share. 

The company’s focus on expanding Instamart and enhancing its food delivery service could give it the momentum it needs to compete head-to-head with Zomato.

Swiggy’s diversified business model, which includes food delivery, quick-commerce, and other ventures like Swiggy Genie, positions it well for long-term growth. The Swiggy IPO could provide the capital needed to scale these operations.

Conclusion

While the Swiggy IPO is poised to be one of the biggest in 2024, challenging Zomato’s dominance will require more than just financial gains. Swiggy will need to build on its strengths, expand its market presence, and outpace Zomato in both food delivery and quick commerce. Whether Swiggy can pull off this feat remains to be seen, but one thing is certain: the battle between these two food-tech giants is far from over.

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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.