Swiggy's IPO valuation chases Zomato's revenue multiple

Food technology major Swiggy is targeting a valuation of between $15 billion and $17 billion. The valuation is closely tied to the revenue multiples of its publicly listed competitor Zomatoin FY24.

Swiggy was valued at $10.7 billion in its last round of funding of $700 million by Invesco in 2022.

Swiggy's annual report presented to shareholders, which was reviewed by YourStory, indicates that Prosus-backed Swiggy is banking on an increase in order values, increased advertising revenues, and cost reduction methods to improve profitability ahead of its public offering.

YourStory had earlier reported that Swiggy was looking to raise nearly $1.3 billion through its public listing, with the draft red herring prospectus to be filed in September.

“Our significant improvement in profitability is driven by an increase in AOV (average order value) led by the shift in category mix to premium offerings, increased advertisement revenues, and reduced last-mile expenses,” the company said in the report.

It further added, “Profitability has sharply improved YoY, as the peak of investments in Instamart is behind us, the business continues to grow rapidly; while the relatively mature food delivery business is scaling-up profitably.” it added.

"The report is not a public document or meant for any person other than shareholders who have received the same under the AGM notice," said Swiggy.

Valuation game

Swiggy is expected to have a revenue multiple of around 11x based on FY24 revenue at a $15-billion valuation during its IPO. This is slightly lower than Zomato's 13x revenue multiple as of March 2024, primarily due to the losses Swiggy has incurred, in contrast to Zomato's profit in the previous year.

“Zomato’s revenue grew faster than that of Swiggy in FY24 and it had a profit. Its share price has further jumped in the last six months due to its strong quarterly show and the overall optimism over the fast growth of Blinkit, the Paytm Insider deal, etc,” said an investment banker closely associated with Swiggy’s IPO, requesting anonymity.

“This will put Swiggy slightly behind Zomato in terms of valuation. The consensus has been that Swiggy is about 60% of Zomato (market cap wise) when it comes to its profitability and growth numbers,” the banker added.

Profit and loss

The SoftBank-backed food tech company posted an operating revenue of Rs 11,247 crore in FY24, a 36% rise from Rs 8,264 crore it clocked in FY23, according to the company’s annual report.

For the comparable period, Swiggy's competitor Zomato clocked an operating revenue of Rs 12,114 crore, a 71% rise from the previous year. While Swiggy ended the year with a loss of Rs 2,350 crore, Zomato finished its first profitable year with a profit of Rs 175 crore.

The Sriharsha Majety-led company reported an 8% rise in its expenses to Rs 13,947 crore.

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Zomato, at a similar revenue level, posted expenses of Rs 12,870 crore in the financial year ended March 31, 2024. 

Swiggy clocked about 14 million transacting users on its platform in FY24, according to the report.

Quick commerce for the win

Swiggy’s quick commerce arm clocked a gross revenue of Rs 1,100 crore in In FY24, rising from Rs 500 crore a year ago.

The gross order value on its platform also improved by 58% to Rs 8,100 crore, according to the annual report.

In contrast, Zomato’s Blinkit posted adjusted revenue of Rs 2,301 crore, with a 169% rise in its gross order value to Rs 12,469 crore, as per exchange filings.

Gross revenue for Swiggy’s food delivery segment grew 17% to Rs 6,100 crore, while Zomato's food delivery segment posted an adjusted revenue of Rs 7,792 crore.

With growth in food delivery stabilising, companies are looking towards greener pastures in quick commerce. The quick commerce space has been heating up with new entrants, wider categories, and fresh funding among peers. Just a week ago, quick commerce unicorn Zepto raised an additional $340 million at a $5 billion valuation from General Catalyst Dragon Fund. 

Moreover, ecommerce giants such as Flipkart and mobility players including Ola are also looking for a slice of the pie by tapping on the synergies from their core offerings.

The copy was updated for factual accuracy.