Swiggy's Rs 11,327-crore IPO is here! Take a look at Bengaluru-based food delivery firm's strengths, weaknesses, opportunities & threats (SWOT)

Food delivery company Swiggy launched an initial public offer (IPO) on Wednesday, November 6, looking to raise Rs 11,327 crore through a combination of fresh issuance and an offer for sale (OFS). The much-anticipated Swiggy IPO, scheduled to be available for bidding from November 6 to November 8, will comprise fresh shares worth Rs 4,499 crore and existing shares amounting to Rs 6,828 crore. Bengaluru-headquartered Swiggy describes itself as a new-age, consumer-first technology company offering users an easy-to-use convenience platform, accessible through a unified app, to browse, select, order and pay for food, grocery and household items, and have their orders delivered to their doorstep through its on-demand delivery partner network. Read on to learn about the food delivery firm's strengths, weaknesses, threats and opportunities in detail. 

Mind you, the Swiggy IPO comes more than three years after rival food delivery company Zomato's IPO and listing. At the launch of the Swiggy IPO, Zomato shares commanded a premium of 218.6 per cent over their IPO price.

First things first, here are a few important points to keep in mind about the Swiggy IPO:

Listing date and other important days: The IPO will be available for bidding from 10 am to 5 pm for three trading days, from November 6 to November 8. The allotment of shares, under the IPO, is set to be finalised tentatively on November 11.

Swiggy shares are likely to debut in the secondary market tentatively on November 13. The Swiggy stock is set to be listed on both BSE and NSE.

Issue price and bidding cost per lot: Under the IPO, shares in the food delivery company will be available for bidding in a price band of Rs 371-390 per share in multiples of 38 units. What that essentially means is that under the IPO, Swiggy shares will be available for bidding for Rs 14,098-14,820 per lot (of 38 shares).

Now, let’s take a look at some of the key strengths, weaknesses, opportunities and threats for the secondary market-bound Swiggy, according to the Bengaluru-based company’s red herring prospectus (RHP):

Strengths

• Swiggy claims to have pioneered high-frequency hyperlocal commerce categories in the country (it launched food delivery in 2014 and quick commerce in 2020)
• It has a rapidly growing user base (as of June 30, 2024, a record 112.73 million users had transacted on its platform)
• Swiggy has successfully positioned itself as a household brand in the country, representing convenience and quality in users’ minds.
• No time and cost over-runs in respect of business operations
• No defaults, rescheduling or restructuring related to debt

Weaknesses

• Swiggy has incurred losses in each year since incorporation, with negative cash flows from operations
• A failure to attract or retain users, delivery partners, restaurant partners, merchant partners and brand partners in a cost-effective way may impact its operations and hence its financial position
• Seasonality, occasions and holidays may cause fluctuations in sales and results of operations
• Swiggy has limited experience in operating its business at its current scale, scope and complexity
• Some aspects of Swiggy's platforms use open source software

Opportunities

• It aims to retain and grow its user base by expanding its offerings and growing its partner network
• It aims to continue increasing the geographical overlap of its various offerings including food delivery and quick commerce
• It plans to invest in its technology backbone and optimise its last-mile network to enable efficient scaling of operations to service more users
• It aims to improve its contribution margin by scaling its operations, and expanding high margin offerings and revenue streams
• It intends to invest in order to enhance its brand recall, improve the traffic on its app, and increase its engagement across business segments

Threats

• The hyperlocal industry is highly competitive
• Changing customer preferences
• Swiggy does not have exclusive arrangements with its delivery partners, merchant partners, brand partners and restaurant partners, who may prioritise competitors' services
• India's online hyperlocal industries are in relatively early stages of growth
• Swiggy relies primarily on third-party insurance policies to manage its operations-related risks
• A rise in domestic inflation may impact Swiggy's ability to achieve or maintain profitability

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