Newly listed Swiggy’s path to profitability has no easy recipe

India’s on-demand delivery market is on fire, with heavyweights Zomato and Swiggy duking it out for dominance.

SoftBank-backed Swiggy is eyeing to raise US$1.4 billion at a US$11.3 billion valuation through its IPO this week.

Photo credit: Swiggy

Meanwhile, Zomato – already listed on the National Stock Exchange of India – is planning to raise US$1 billion, representing the company’s first major fundraise since its own IPO in 2021.

While both companies mirror each other’s offerings in food delivery, dining, and quick commerce, Zomato holds a clear lead in growth, profitability, and market share.

The company faced financial challenges at the time of its listing but has since turned things around. It reached profitability in the financial year ending March 2024.

Swiggy is not yet profitable, but it grew its FY 2024 topline by 34% year on year. Meanwhile, its losses narrowed by 44% over the same period.

However, it might find the road ahead more challenging as it contends with fierce competition in quick commerce, a rapidly expanding sector that has become essential for the company’s growth.

Multiple players such as Zepto, Flipkart Minutes, Tata’s BigBasket, and Zomato’s Blinkit are jostling for a share of this market, and Swiggy’s journey to profitability will require it to navigate these rivalries.

Appetite for quick commerce

During a pre-IPO press conference, a Swiggy executive said that the original plan was for quick commerce to reach 10% of the company’s overall revenue.

However, the vertical has since grown to generate around 40% of Swiggy’s current revenue. Given this trajectory, the company expects that its quick commerce unit will become larger than its food delivery business.

See also: Behind India’s race to deliver everything, everywhere under 15 minutes

Indeed, Swiggy’s investment plans align with this outlook. It looks to allocate nearly US$90 million of its IPO funds to expand its dark store network by 741 locations over the next four years.

This allocation represents a 35% increase over the US$66 million initially earmarked for dark-store expansion in an earlier version of the prospectus. The firm plans to open facilities in new locations as well as in areas where it already has dark stores present.

Falling in food delivery

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