In a spectacular start, Swiggy’s stock rose almost 17% this week on the National Stock Exchange (NSE) in India, closing at ₹456 and reaching a valuation of around $12.1 billion. With $1.4 billion raised, this successful IPO is India’s second-largest IPO of the year, demonstrating investor confidence in the rapidly expanding grocery and food delivery industry. Here’s a closer look at Swiggy’s growth strategy, IPO experience, and the changing competitive environment in fast commerce.
Credits: Reuters
Swiggy’s IPO Defies Market Sentiment, Attracts Strong Investor Demand
Swiggy’s trading debut exceeded expectations, especially given the broader market’s recent volatility. Investor demand was high, with the IPO oversubscribed more than threefold, driven largely by institutional investors who poured in orders on the sale’s final day. The stock’s strong performance defied analysts’ predictions of a challenging listing for the loss-making company, showing an investor appetite for tech-enabled quick commerce and delivery firms.
Swiggy’s shares opened at ₹465.8 before settling at ₹456, significantly higher than its IPO price. With this strong market entry, Swiggy now stands valued at $12.1 billion, highlighting growing confidence in India’s digital commerce sector, where rapid delivery is becoming the norm.
The Appeal of Quick Commerce and Digital Delivery: Swiggy’s Edge
Swiggy has leveraged India’s shifting consumer preferences, with more people ordering groceries, essentials, and meals online for convenience and speed. This shift, fueled by the pandemic, has led Swiggy to develop its quick commerce service, Instamart, which promises grocery delivery within minutes. The service has been a major growth engine, meeting the demands of urban customers who seek immediate convenience and fueling explosive growth in Swiggy’s overall business.
According to Swiggy board member Anand Kripalu, Instamart has seen “explosive growth,” and this aligns with the estimated $6 billion quick commerce sector in India, a figure projected to expand further in the coming years. However, the competition remains fierce, with Zomato’s Blinkit holding a 40% market share and Swiggy close behind at 30%, per research by Datum Intelligence.
Credits: Reuters
Challenges Ahead: Competition and Profitability
Despite a stellar debut, Swiggy faces substantial challenges, particularly in profitability and market competition. While the company has narrowed its annual losses, it has yet to post a profit, unlike its primary competitor Zomato, which achieved profitability in fiscal 2024. Zomato’s early success has heightened expectations for Swiggy, but the company’s current financials remain a concern for some analysts. Macquarie Capital estimates that Swiggy’s food delivery order values for 2024-25 will reach $3.3 billion, roughly 25% less than Zomato’s, underscoring Swiggy’s need to bridge this performance gap.
Industry experts caution that Swiggy’s continued losses and the challenging economic environment may temper investor enthusiasm in the long run. Shivani Nyati, head of wealth at Swastika Investmart, commented, “The company’s continued losses and the challenging market conditions may temper investor enthusiasm in the long term,” pointing to the importance of a clear path to profitability for sustained investor support.
Regulatory Scrutiny and the Quick Commerce Debate
Swiggy and Zomato’s rapid delivery offerings have not only transformed consumer behavior but also attracted the scrutiny of regulators and retail groups. Both companies are currently under investigation for potential breaches of competition laws in the food delivery business, with critics arguing that aggressive discounts and delivery speeds could be unfairly pressuring traditional retailers. Additionally, there are calls to review Swiggy’s quick commerce practices, with concerns around alleged predatory pricing affecting the viability of smaller grocery stores.
The scrutiny reflects the challenges that come with rapid innovation in the retail and delivery space, where digital-first companies often disrupt established business models. For Swiggy, this regulatory attention could impact its operational freedom and future growth strategies.
Global Backers and Future Outlook
Swiggy’s impressive IPO has also delivered substantial gains for its international backers. Dutch technology investor Prosus, which holds a 25% stake, reported a $2 billion return on its Swiggy investment. SoftBank, another prominent investor, holds an 8% stake, reflecting the global appeal of Swiggy’s business model and the interest of major investors in India’s digital commerce ecosystem.
