Swiggy’s CEO Sriharsha Majety and CFO Rahul Bothra on Monday outlined an ambitious growth strategy, including a projection of the company’s expansion in quick commerce that could tap into a total addressable market (TAM) ranging between USD 30 billion to USD 50 billion over the next four years.
During a discussion with reporters on upcoming IPO in Bengaluru, Majety mentioned the immense potential within the quick commerce sector. “I think it is a generational opportunity… we are really in the first few minutes of the game here in quick commerce.”
Swiggy also sees promising growth prospects in the food services industry, with the overall market anticipated to grow at a 10-11 per cent CAGR. Specifically, the online food delivery category, in which Swiggy operates, is projected to expand at a 17-22 per cent CAGR over the next four years.
“In fact, online food delivery happened before outside food happened in India today, together like Swiggy, Zomato are a third of overall organised restaurant industry. It has not happened anywhere else in the world. So, we think that there’s a multi-decadal opportunity just because of the underlying rails,” noted Majety, expecting the restaurant market to expand significantly in the coming decades.
Looking ahead, Majety projected that Swiggy could expand its consumer base significantly, catering to between 300 million and 500 million users in the next 10 to 20 years, compared to the current 150 million consumers it serves. He stressed the potential for growth, explaining that as new users join the market, Swiggy aims to continuously innovate and introduce new offerings.
With a commitment to unlocking new consumption occasions, Majety expressed confidence in Swiggy’s trajectory. “Every year we are constantly piloting to see if there are things that belong in the future... there are more users coming in and then hopefully we keep doing what we're doing to unlock new consumption occasions,” he said.
Swiggy plans to launch its initial public offering (IPO) this Wednesday, with the bidding process set to close on Friday.
The IPO comprises a fresh issue amounting to Rs 4,499 crore alongside an offer for sale of 17.5 crore shares. The anticipated share price is expected to range from Rs 371 to Rs 390. If the shares are priced at the maximum of this range, Swiggy aims to generate Rs 11,327.4 crore from the offering.
Swiggy In Numbers
Swiggy’s Chief Financial Officer Rahul Bothra presented an optimistic outlook during the IPO roadshow in Bangalore, focusing on the food delivery platform's impressive growth in user engagement, financial performance, and operational efficiency.
In the meeting with reporters, Bothra stressed Swiggy’s evolution into a multi-service platform and how this integration has translated into decent operating numbers. He revealed that users acquired in FY19, who initially spent Rs 100 on the platform, have now tripled their expenditure, averaging Rs 283 over the last six years.
“Interestingly, if you see the latest cohort FY23 users who came in with Rs 100 of spending have doubled their spending in less than one year,” Bothra noted.
User frequency on the platform has also witnessed growth, with a 70 per cent increase over the past six years and a 12 per cent uptick in the last year alone. This trend is reflected in the number of users engaging with multiple services. Currently, 27 per cent of Swiggy’s user base utilises more than one service, a figure that has more than doubled in the last two years.
Flywheel Effect Driving Engagement
Bothra elaborated on the company’s strategic flywheel effect, where users of Swiggy’s food delivery services are now funneling into other offerings like Instamart. “Initially, when we launched the Instamart, a lot of these food users used to be funneled into the q-commerce funnel. But because grocery being the large addressable market today, we see one out of four users of Instamart coming to Swiggy,” he said.
Interestingly, half of these new Instamart users have subsequently started using food delivery services, indicating a reverse flow of user engagement that strengthens Swiggy’s position across its service lines.
The company’s reach has expanded, with food delivery now available in 681 cities, concierge services in 69 cities, dining out in 52 cities, and Instamart in 32 cities. Bothra noted that as geographic overlap increases, Swiggy will reap compounded benefits when launching in new locations, beginning with a highly engaged user base.
Strong Financial Performance
From a financial perspective, Swiggy reported decent growth, achieving a gross order value (GOV) of Rs 35,000 crore last year, with a compound annual growth rate (CAGR) of 32 per cent over the past three years. The breakdown is as follows:
Food Delivery: Rs 25,000 crore, growing at a CAGR of 16 per cent
Instamart: Rs 8,000 crore, growing at a CAGR of 122 per cent
Dining Out: Rs 2,200 crore, growing at a CAGR of 98 per cent
The user base has expanded to 1.6 crore unique monthly transacting users, a 60 per cent increase. The monthly GOV per transacting user increased by 30 per cent, from Rs 1,600 to Rs 2,100. Moreover, Swiggy’s restaurant partner count has risen by 70 per cent, reaching 2,24,000 unique partners, while the delivery partner count surged by 90 per cent to 4,57,000.
Improved Margins And Contribution
The company also reported a reduction in its operating losses. Swiggy’s EBITDA loss has decreased from -14 per cent in FY23 to -3.4 per cent in Q1, with the food delivery segment becoming profitable. The gross margin per order has seen a decent rise, increasing from Rs 6 in FY22 to Rs 28 in Q1, while the contribution margin has more than doubled from 2.9 per cent in FY22 to 6.4 per cent.
In the quick commerce segment, Swiggy has expanded its dark stores and product selection, with the average size of dark stores increasing from 2,800 square feet to 4,000 square feet and SKU availability growing from 8,800 to over 19,000. Delivery times have improved drastically, with the average delivery speed dropping from 70 minutes to just 12.5 minutes over the past year.
The average order value for quick commerce has risen from Rs 441 to Rs 487 in the last 12 months, while the frequency of orders remains strong at 3.6 times per month. Bothra mentioned that “this focus has meant that we have continued to deliver better operating results in the food and the quick commerce business.”
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