Swiggy Faces Uphill Battle as It Prepares for IPO, Lagging Behind Rival Zomato in Key Metrics
Swiggy, one of India’s leading food delivery platforms, is gearing up for its much-anticipated IPO in November 2024. However, as it prepares to go public, it faces stiff competition from its main rival, Zomato Ltd., which has outperformed Swiggy across key metrics in both food delivery and quick commerce. According to a recent report by Macquarie, Swiggy lags behind Zomato by four to six quarters in terms of performance in these segments.
One of the most significant differences between the two companies is their Gross Order Value (GOV). In the first quarter of fiscal 2025, Swiggy’s GOV stood at $820 million, significantly lower than Zomato’s $1,116 million during the same period. This puts Swiggy’s GOV at approximately 26.5% behind Zomato’s. The gap in performance is also evident in the number of monthly transacting users. Swiggy’s platform serves around 14 million users monthly, while Zomato has a larger user base of 20 million.
Despite Zomato’s lead in user numbers, both companies exhibit similar order frequency. Interestingly, Swiggy’s average order value is slightly higher than Zomato’s. However, Swiggy’s lower contribution margin is a challenge, primarily due to the company offering higher discounts compared to its competitor. This pricing strategy may have helped Swiggy retain customers but has also affected its profitability.
In the quick commerce sector, where both companies are also active, Zomato’s Blinkit has established a stronger foothold than Swiggy’s Instamart. Blinkit boasts a monthly transacting user base of 7.6 million, compared to Instamart’s 5.2 million users. Blinkit has also achieved a significant milestone by reaching adjusted EBITDA margin breakeven, a key indicator of profitability. In contrast, Instamart is still struggling with losses, adding to the challenges Swiggy faces as it prepares for its IPO.
As Swiggy inches closer to its public listing, the company will need to focus on closing the gap with Zomato across these critical areas. Improving its Gross Order Value, expanding its user base, and increasing profitability in the quick commerce segment are likely to be among Swiggy’s top priorities. The company has already made some moves toward its public listing, submitting an updated draft red herring prospectus to the Securities and Exchange Board of India (SEBI) for review and public comment.
Swiggy’s IPO is expected to value the company at approximately Rs 83,365 crore, or nearly $10 billion. Following the conversion of all preference shares issued to investors prior to the draft filing, Swiggy will have a total of 222.30 crore equity shares, each with a face value of Re 1. Recent share transfers by investors, at prices ranging from Rs 330 to Rs 375 per share, have valued the company between Rs 73,811 crore and Rs 83,365 crore. The size of the IPO is projected to fall between Rs 9,864 crore and Rs 10,700 crore.
While Swiggy continues to gear up for its IPO, its competitor Zomato is navigating its own market dynamics. On Wednesday, Zomato’s shares opened lower, dropping as much as 0.89% before reducing losses to trade 0.55% lower at Rs 278 per share by 09:19 a.m. This dip in share price compared to a 0.13% decline in the NSE Nifty 50 index on the same day. Despite the recent dip, Zomato’s stock has seen an impressive rise of 149.33% over the past 12 months, reflecting strong investor confidence.
As of the latest data, 24 out of 27 analysts tracking Zomato maintain a ‘buy’ rating for the stock, while three recommend a ‘sell’. According to Bloomberg data, the average 12-month analysts’ consensus price target suggests an upside of 2.7%.
The competition between Swiggy and Zomato remains fierce, especially as Swiggy works to strengthen its position ahead of its IPO. Both companies are key players in India’s booming food delivery and quick commerce markets, and their strategies in the coming quarters will be closely watched by investors and industry observers alike. Swiggy’s ability to close the performance gap with Zomato and achieve profitability in its quick commerce segment will likely be critical to the success of its IPO and its long-term market standing.