Swiggy’s upcoming IPO on Wednesday will finally provide a public comparison many analysts have long considered. gave Indian internet stock: Zomato. It will also test the nation’s appetite for IPOs that could cross the $1 billion mark.
For its IPO, Swiggy has already raised $1.4 billion from institutional investors including Norway’s sovereign wealth fund, BlackRock and eight of the top 10 Indian mutual funds. Still, it will enter a public market where stocks of big tech companies have historically struggled. Three years after its $2.5 billion offering, Paytm is still trading 47% below its IPO price.
More than a dozen Indian tech startups have gone public in the past four years, but the market has shown little interest in large IPOs. Beauty and wellness e-commerce company Nykaa is still trading 53% below its initial price, and Star Health and Alliance Insurance Company is 48% below its IPO price three years later. Startups in India that have raised less than $500 million have fared incredibly well in comparison.
India has emerged as a hotbed for tech IPOs this year even as the US market remains quiet. All eyes are on Swiggy’s IPO right now, especially among many growth-stage startups — and their investors are eyeing a similar slate over the next 24 months.
Additionally, for many Indian startups that were based in the US and Singapore, shifting their official headquarters back to India would allow them to better comply with local regulations for conducting such IPOs. It’s also an opportunity to reap the benefits of a market whose benchmark index rose more than 10% in the past year. According to investors, up to three dozen startups may shift their domicile back to India in the coming years.
Swiggy’s IPO prospects look good — especially given that rival Zomato’s stock has risen more than 100% since its $1.3 billion listing in 2021, to a high of $29 billion this year. The highest market cap has been reached. In comparison, Swiggy is asking for a valuation of $11.3 billion.
It helps that the Indian food delivery market has long been a duopoly between Zomato and Swiggy. And what makes the offering even more attractive to investors is that Swiggy is among a dozen firms trying to disrupt the $1.1 trillion Indian retail market, which is still dominated by millions of mom-and-pop stores. There is dominance.
Swiggy’s Instamart is among the top three instant commerce businesses in the country, promising to deliver groceries, health and beauty products and more within 10 minutes. Whether these companies will be able to revolutionize the broader retail market in India remains to be seen, but according to JP Morgan, they have already captured 56 percent of the online grocery delivery market from e-commerce firms. are
Quick commerce firms like Instamart, Zomato-owned BlinkIt, Zepto, BigBasket, and Minutes are changing consumer behavior in urban Indian cities, home to around 80 million people. Together, they’re on track to record more than $6 billion in sales this year, TechCrunch estimates.
“I don’t think Swiggy will be just an e-commerce company in the future, but I think given the growth rate of Instamart, and the total addressable market that follows, the percentage of e-commerce in Swiggy is increasing. To make a dramatic change,” Swiggy co-founder and chief executive Sri Harsha Majati (pictured above) said in an interview with TechCrunch.
Underpinning this business model is a unique supply chain system that involves strategically setting up hundreds of discrete warehouses, or “dark stores,” within kilometers of residential and business areas. This allows firms to deliver within minutes of ordering.
This approach is different from e-commerce players like Amazon and Flipkart, which have fewer but very large warehouses in areas where rent is cheap and away from residential areas.
Swiggy operates over 600 such facilities, while Zomato’s Blinkit ended the September quarter with 791 stores.
Swiggy, which counts Prosus, SoftBank, Accel and Elevation among its backers, has expanded Instamart to 30 Indian cities. But many investors and analysts have expressed doubts about the viability of expanding the quick-commerce model to smaller Indian cities and towns.
“Do we have an operating model for City No. 500? Honestly, I don’t know,” Azmat said. Asked if the model works on the City No. 75, Majetti said: “I think it probably does. We’ll see the City 75 doing business immediately.
Swiggy’s IPO will also show how investors are willing to bet on business models that prioritize growth over profitability amid challenging global conditions.
For the Dutch investor process, Swiggy’s listing could provide triple returns. It would also be the venture firm’s biggest hit from India, where its more than $1 billion profit from Baiju has all but been wiped out. Accel is expected to return more than 35 times, one of its biggest returns in the last five years.
Credit : techcrunch.com
