Swiggy, one of India’s leading online food and grocery delivery platforms, is set to launch its IPO on November 6, aiming to raise approximately ₹11,327.43 crore. With this much-anticipated public offering, Swiggy enters the stock market in direct competition with its rival Zomato, which has already established itself as a profitable player.
Swiggy’s IPO consists of 11.54 crore fresh equity shares worth ₹4,499 crore, alongside an Offer for Sale (OFS) of 17.51 crore shares valued at ₹6,828.43 crore. This places Swiggy’s IPO valuation at around $11.3 billion, slightly above its valuation from the last funding round in 2022.
But with Zomato’s success on the stock market, investors are now faced with the decision: should they invest in Swiggy’s IPO, or is Zomato still the better option?
Price Band and Valuation Comparison
Swiggy has set a price band of ₹371-₹390 per share. The IPO launch places Swiggy’s valuation close to $11.3 billion. Meanwhile, Zomato, which went public in July 2021, had an initial valuation of $13 billion, which has since more than doubled. As of November 2024, Zomato’s market cap reached $25 billion, making it a formidable competitor.
Profitability and Market Dominance
While Zomato has moved into profitability, Swiggy is still working to address losses over the past three financial years. This difference in profitability is a major factor for investors. Zomato’s successful turnaround into a profitable company strengthens its position, while Swiggy still faces pressure to achieve profitability.
Moreover, Zomato leads in key indicators such as Average Order Value (AOV) and Gross Order Value (GOV). According to Aakriti Mehrotra, a research analyst at Stockbox, Zomato has the advantage with a larger market share and a Gross Order Value CAGR of 23%. Swiggy, on the other hand, has a lower GOV growth rate at around 15.5%, suggesting that Zomato is currently more robust in market performance.
Swiggy’s Potential and Growth Strategy
Despite Zomato’s current edge, Swiggy remains a promising company with significant room for growth. The IPO funds will support Swiggy’s expansion efforts and help it streamline its operations. However, how effectively Swiggy can leverage these resources to close the gap with Zomato remains uncertain.
Mehrotra highlights that while Zomato is more favorable in terms of near-term growth and profitability, Swiggy could still be an interesting long-term play if it adopts an aggressive yet balanced growth strategy post-IPO. If Swiggy can expand into new services or capture more market share, it may offer solid returns in the future.
What Experts Recommend: Swiggy or Zomato?
For those looking to invest in the food delivery space, Zomato’s profitability and market dominance make it a strong choice, especially in the medium term. Anshul Jain, another market expert, agrees with this view, noting that Zomato’s profitable status and stronger positioning make it a safer investment than Swiggy’s IPO at this point.
However, Swiggy’s IPO could still be appealing to those looking for higher risk with potential rewards if Swiggy manages to improve its financial performance in the coming years. Investors who have confidence in Swiggy’s future growth strategy might consider buying into its IPO for long-term gains.
Zomato Stock Performance
Although Zomato shares have been under pressure recently, they have delivered impressive returns since listing. Zomato’s shares have risen by more than 95% over the year, although they experienced an 11% drop in the past month. For many investors, the stock’s proven growth makes it an attractive option.
Conclusion: An Investment Choice Based on Risk and Growth
When deciding between Swiggy’s IPO and Zomato shares, it boils down to your risk appetite. Zomato’s established profitability and market share make it a safer choice for steady returns, while Swiggy’s IPO offers a growth opportunity with a higher risk-reward profile.
