Swiggy IPO: Sriharsha Majety, Rahul Bothra Bullish On Food Delivery Business

Swiggy Ltd., whose initial public offering (IPO) is set for launch next week, is bullish on its food delivery business, citing the underlying growth of restaurants industry in India. Swiggy IPO is set to launch on November 6.

In a conversation with NDTV Profit, Swiggy's top management said the restaurant industry is far from its peak in India, which provides an opportunity for food delivery aggregators to expand their business for years to come.

"Food delivery is an exciting business in view of India's growing population, expanding GDP, and increasing per capita income," said Sriharsha Majety, managing director and group chief executive officer of Swiggy.

"If you look at underlying sectors of any online platform, you will see restaurant industry as the fastest growing industry. So, we are growing at the top of a secular tailwind that will last very long," Majety said.

Notably, Swiggy operates its food delivery business in over 600 cities in India. It is the second largest player in this segment, after industry leader Zomato Ltd.

"We think we may already have a lot of restaurants in India, but actually we don't. We are witnessing the beginning of the restaurant industry in India. It is way smaller than any other country in the world," Majety said.

In fiscal 2024, Swiggy's food delivery business grew 17% to clock a gross revenue of Rs 6,100 crore, whereas the company recorded a gross revenue of Rs 1,100 crore through Swiggy Instamart—its quick commerce arm.

Swiggy recently increased its platform fee for food delivery to Rs 10 per order. Commenting on the same, the company's Chief Financial Officer Rahul Bothra said, "Increasing platform fees is one of the levers we have used to increased monetisation."

The commissions from restaurants have been stable, Bothra said, adding that the company does not see the need to increase the rates further.

Q-Commerce In Focus

While quick commerce has been a key contributor in Swiggy's overall top line, the company sees the industry at an early stage in India.

The category is still in "early days of evolution and going through quick transformation", Majety said, while noting that the consumer response has been "exciting so far".

On being asked about the adverse impact on kirana stores due to the rapid expansion of quick commerce, the Swiggy Group CEO said, "It's still a very small part of the overall industry despite strong consumer adoption."

Notably, Swiggy Instamart operates in 32 cities with around 550 dark stories. The company is in the process of increasing the store count, Majety said.

"Darkstore is a derivative of growth. If the category accelerates, the store count could expand at a faster pace," Bothra said.

Swiggy, which is aiming to raise Rs 4,499 crore through the fresh issue component of its IPO, will use a portion of the proceeds to expand the dark store network of Instamart.

The issue, with a price band of Rs 371-390 per share, will be open for subscription from Nov. 6 to Nov. 8. At the upper price, the company is valued at around Rs 87,299 crore, or $10.38 billion, which is also a tad lower than its earlier target of $11.2 billion.

Apart from the fresh issue, the IPO also comprises a secondary sale of shares worth Rs 6,828 crore through the offer-for-sale component. This takes the overall issue size to Rs 11,327 crore.

The bulk of the shares on offer, or 75% of the overall issue, has been reserved for qualified institutional buyers, 15% for Non-Institutional Investors, and 10% has been reserved for retail investors.