Indian food delivery giant Swiggy is preparing for a much-anticipated initial public offering (IPO), but the road ahead seems to be filled with potholes. The internal document obtained by Reuters, reveals a significant loss of $200 million for the nine months leading up to December 2023, adding to the company’s abundant $500 million loss for the entire fiscal year 2022-23
Swiggy financial crises came amidst a booming Indian Stock market that has surged over 28% in the past year. This rise has encouraged many companies to list their shares, but it seems like Swiggy’s story follows a pattern similar to that of Paytm, a digital payment firm, which listed its shares in 2021, and after the initial listing the value of the shares plummeted to a staggering 80%, mainly due to concerns about inflated valuation of its IPO. Swiggy’s main competitor Zomato met with the same fate after its 2021 listing, but since then it has managed to turn things around with two consecutive quarters of profits, leading to a 45% surge in its share price this year.
But the company is planning to avoid a similar experience by implementing cutbacks. The company plans to cut losses by cutting wages and reducing marketing expenses. This despite Swiggy boasting a $10.7 billion valuation to investors by 2022. In order to capitalize, Swiggy has expanded its services beyond food delivery and offers food delivery and dining subscriptions in addition to its streams In 2022, the company Dineout, a restaurant that keeps about And is acquired in a deal worth $150 million. However, this acquisition likely increased Swiggy’s overall costs in the short term.
Swiggy’s dream of a successful IPO seems far from reality. As Swiggy has yet to turn a profit, that raises concerns about its long-term financial sustainability.The Indian food delivery market is a stiff battleground where Zomato has dominance. Acquiring new customers can be expensive, especially with ongoing competition. Swiggy has to spend heavily on marketing and promotions to attract new users which will be another hole in the swiggy’s pocket.
Swiggy must stay off from the path of over-evaluation of its IPO, setting a more realistic value that reflects the current financial situation of the company is important to secure investor’s confidence. Additionally, the overall health of the Indian stock market and investor sentiment toward tech startups will play a significant role, a positive market outlook would be more favorable for Swiggy’s IPO.
The planned Swiggy IPO is a small part of a larger process in which a number of Indian startups are trying to go public to raise funds fromstock market players. The success and failure of Swiggy’s IPO will be closely watched by the startup community and investors, and could set the tone for future tech IPOs in India.
Although the company has struggled with losses, it is worth noting that although the company generated $1.02 billion in revenue for the April to December 2023 period, this number shows a slight decline relative to earnings it was down slightly from the $1.05 billion it reported in the previous fiscal year. This means that growth could stall, which could be a concern for investors.
