With its anticipated Initial Public Offering (IPO) later this year, Swiggy, one of the biggest food delivery services in India, is preparing for a momentous occasion. According to the company’s annual report for the fiscal year 2023–2024, the discovery of a ₹33 crore misappropriation by a former junior employee has put the company in serious jeopardy. Concerns over internal governance are brought up by this episode, particularly at this critical juncture when the corporation is trying to win over investors’ trust in the stock market.
Credits: Money Control
Embezzlement Details and Legal Action
The most recent annual report from Swiggy states that a former junior employee embezzled ₹326.76 million (about ₹33 crore) over “past periods.” The business launched a lawsuit against the offending party and engaged an outside team to look into the situation. For the year ending March 31, 2024, Swiggy’s financial accounts showed the embezzled sum as a cost.
Although Swiggy has not spoken in-depth on the embezzlement instance, its prompt handling of the issue shows that company is attempting to limit any potential harm. The fact that the event happened in one of Swiggy’s subsidiaries highlights the necessity of more robust governance and oversight systems.
Financial Performance in FY24
Swiggy’s financial results for FY24 show growth and recovery despite the misappropriation. Revenue increased by 36% to ₹11,247 crore, according to the business. Furthermore, it was able to significantly narrow its losses, which dropped from ₹4,179 crore in FY23 to ₹2,350 crore. Strategic cost-cutting was the driving force behind this improvement; most significantly, marketing and promotion costs were decreased from ₹2,501 crore in FY23 to ₹1,851 crore in FY24.
With ₹13,947 crore in total spending for FY24, Swiggy spent 8% less than it did in the previous fiscal year. The company focuses on growing its food delivery business financially and reaching maturity in its quick-commerce venture, Instamart, and owes these financial advantages to operational efficiency.
IPO Plans: Navigating Through Uncertainty
April 2024 saw the covert filing of Swiggy’s draft IPO paperwork. The company intends to raise up to ₹3,750 crore through the issuance of new shares, and up to ₹6,664 crore through an offer-for-sale component. One of the most anticipated public offerings in India, the ultimate IPO amount is estimated to be about ₹1.25 billion (₹10,414 crore).
However, there’s a potential that these IPO preparations will be complicated by the embezzlement case. Concerns regarding internal governance and controls are common among investors, and are significant factors in the value of firms preparing to go public. Investor trust is crucial for Swiggy, especially since it wants to compete with Zomato, its primary rival that has already gone public on the stock market.
Swiggy’s Market Position and Competitive Landscape
While Swiggy has made significant strides in reducing its losses and improving profitability, it still trails behind Zomato in terms of market share. In FY24, the two companies jointly accounted for a gross order value (GOV) of ₹56,924 crore in the food delivery industry, with Zomato holding 57% of the market share and Swiggy controlling the remaining 43%.
Swiggy has been ramping up its investments in Instamart, its quick-commerce venture, though the company now reports that the peak of these investments is behind it. With quick commerce reaching a more stable stage, Swiggy expects further improvements to its bottom line. This strategy is critical as the company needs to scale both its food delivery and quick commerce operations while maintaining profitability.
Conclusion: A Crucial Test for Swiggy’s Governance
The way Swiggy handles this embezzlement case as it gets ready for its IPO will be a key indicator of how well its corporate governance is working. The business needs to ensure investors that its internal checks and balances are strong enough to stop such accidents from happening in order to raise significant financing from the public markets.
The way Swiggy handles this governance issue will now determine how the market views the company, even though its financial performance and growth potential are still strong. Whether Swiggy can bounce back from this setback and keep up its competitive edge in the fiercely competitive food delivery and rapid commerce sectors will be determined in the upcoming months.
