Swiggy’s much-anticipated IPO is set to be one of the most awaited public offerings of the year. Following in the footsteps of its rival Zomato, which made a strong debut on the stock market, investor expectations are high for Swiggy — especially regarding its path to profitability.
Founded in 2014 by Sriharsha Majety, Nandan Reddy, and Rahul Jaimini, Swiggy began as a food delivery platform but has since expanded into multiple verticals. These include the pick-up and drop-off service Genie (2020), quick commerce segment Instamart (2020), and the acquisition of Dineout (2022). Additionally, the company has ventured into hyperlocal commerce through Swiggy Minis. However, Swiggy’s big bet is on quick commerce, which has become a significant focus as it approaches its IPO.
According to its Updated Draft Red Herring Prospectus (UDRHP), Swiggy plans to invest Rs 982.4 crore to expand its network of dark stores for the quick commerce segment and cover lease and license payments. The IPO is expected to raise around Rs 10,000 crore, with a fresh issue worth Rs 3,750 crore and an offer for sale (OFS) exceeding Rs 6,500 crore.
Quick commerce, a term that was virtually unknown before 2020, has gained significant traction in the last four years, particularly in the top 15 cities, where grocery deliveries have seen rapid growth. While food delivery has already penetrated tier-2 cities, grocery delivery remains concentrated in urban centers. According to Redseer, the quick commerce market is projected to grow by 75-85% in FY25, reaching a GMV of $6 billion. This growth is expected to be driven by 5 million new Monthly Transacting Users (MTUs) and a 20% increase in spending by existing MTUs.
Despite its relative novelty and struggles in markets outside India, quick commerce is reshaping grocery shopping in the country. Deepinder Goyal, founder of Zomato, previously told Business Today that Zomato's acquisition of Blinkit, a quick commerce player, could potentially outgrow its core food delivery business. Although Blinkit is yet to turn a profit, Zomato achieved profitability as a whole in FY24, posting a consolidated profit of Rs 351 crore, compared to losses of Rs 971 crore in FY23 and Rs 1,208.70 crore in FY22. Swiggy, meanwhile, narrowed its losses to Rs 2,350.24 crore in FY24, down from Rs 4,179.30 crore in FY23 and Rs 3,628.89 crore in FY22.
"Unlike Zomato, which didn’t have a direct benchmark when it listed, Swiggy has the advantage of learning from its competitors," says Satish Meena, advisor at Datum Intell. "The good thing about Swiggy is they aren’t valuing it as aggressively as Paytm, which investors may appreciate."
Swiggy is currently eyeing a $10 billion valuation, while Zomato has already reached a $30 billion market cap. The quick commerce segment remains a key focus for Swiggy, with the company aggressively expanding its dark store network and securing several brand partnerships to strengthen its foothold.
Meena also notes that grocery delivery presents a far bigger opportunity than food delivery, especially in metro cities. "While restaurant choices and budgets may vary for food delivery, grocery spending is more consistent. Grocery delivery is a much larger category, particularly in the top eight cities."
For the first time in nearly a decade, online grocery has found a scalable model. With additional revenue streams like advertising and seller listings, there is potential for the segment to turn profitable. While Blinkit is yet to achieve this, Meena adds, it is moving in the right direction.
As Swiggy prepares for its potential Diwali IPO, the road to profitability remains a work in progress. With stiff competition from Blinkit, Zepto, Flipkart Minutes, and BigBasket, the quick commerce space is becoming increasingly crowded, but Swiggy’s aggressive push could give it the edge in the long run.