Swiggy IPO: Accel, Prosus, Elevation, Alpha wave to sell part stakes

Swiggy's early investors including Accel, Alpha Wave, Elevation Capital and Prosus are selling some of their stake under the offer for sale option in the food delivery startup's upcoming initial public offering, its draft red herring prospectus indicated. 

While the others include Norwest and Tencent, the IPO involves a combination of fresh issue of equity shares worth ₹3,750 crore and an offer-for-sale of 185,286,265 equity shares by the existing shareholders.

Swiggy’s much anticipated IPO is the second company to go public in this space with Zomato being the pioneer. Kotak Mahindra Capital Co., Citigroup Global Markets India, Jefferies India and Avendus Capital have been appointed as bankers for the offering. 

Swiggy reduced its losses by 43%, totaling ₹2,350 crore in FY24, driven by rapid growth in its food delivery and quick commerce segments. The revenue from operations increased by 36%, reaching ₹11,247 crore. Its consumer-facing business, which includes food delivery, Instamart, and dining, reported a gross order value (GOV) of ₹35,000 crore, fuelled by 14.3 million monthly transacting users.

Increase in Gross Order Value

The gross order value (GOV) of Swiggy’s consolidated business in the June quarter of FY25 was ₹10,189 crore, up from ₹8,277 crore in the year-ago period. Revenue from operations in the quarter grew to ₹3,222 crore, up 34% from the same period in FY24.

Swiggy in it's DRHP on Thursday said that its GOV is not concentrated in a specific geography and that the company will use the proceeds to expand its user and partner base in new cities. However, it noted that the effort may require more investment than planned and may not result in increased revenue or growth in the business.

Also read: Swiggy IPO: Madhuri Dixit invests ₹1.5 crore, picks up stake ahead of market debut, says report

Swiggy Instamart - its quick commerce arm's gross revenue in FY24 was ₹1,100 crore, against Blinkit's ₹2,301 crore. Instamart's GOV, an indication of all transacted orders on the platform, for the year was ₹8,100 crore, while rival Zomato-backed Blinkit's stood at ₹12,469 crore.

Earlier this month, Mint reported that the IPO, one of the highly anticipated of the year, is expected to open in November.

Plans for Instamart

The food delivery company plans to allocate most of the proceeds from its upcoming IPO to expand Instamart, as competitors like Blinkit, Zepto, and BigBasket intensify their presence in the quick commerce space.

SoftBank, which had realized profits in recent IPOs of Ola Electric, Firstcry, and Unicommerce, is not selling its stake under the OFS. Mint earlier reported that the investment firm is expected to hold onto its stake.

Also read: Inside Swiggy's Journey: Phani Kishan Addepalli on a decade of disruption

Swiggy will use most of the fresh funds to double its network of dark stores serving groceries and home essentials to more than 1,000 over the next four years as it deepens presence in several cities, Mint reported earlier this month.

The Bengaluru-based startup, which began as a restaurant aggregator in 2014, has turned its focus to cutting flab and improving margins over the last 18 months. According to co-founder and chief executive Sriharsha Majety, its food delivery unit turned profitable in March 2023.

But quick commerce has been a relatively new venture. Swiggy launched Instamart largely focussed on fast-moving groceries in 2020. Compared with Blinkit, this business is still new and has seen a fair bit of churn in leadership. It was initially led by Karthik Gurumurthy, who left in 2023. At that point, Swiggy put its co-founder Phani Kishan Adepalli in the role.

Broadly, quick commerce has become a hot space with several players including Blinkit, Nexus Venture Partners-backed Zepto and Tata’s BigBasket rushing to cash in on this growing opportunity, raising capital and aggressively expanding. Large e-commerce players such as Flipkart are also looking to invest in quick commerce as consumers get hooked to instant deliveries of both small grocery items and big-ticket goods like appliances and electronics.

Also read | How Zomato and Swiggy are sparking a boom for small-city eateries

Swiggy intends to use a big proportion of the proceeds to expand its quick commerce operations, a proposition it seems to be scaling rapidly. It added a total of 59 dark stores in the June quarter, taking the count to 581. Other major use of IPO proceeds includes brand marketing and promotional expenses as well as investment in technology and cloud infrastructure.

Swiggy Instamart’s dark stores are likely to be bigger in size to accommodate more stock-keeping units, Mint had reported earlier this month.