Swiggy vs. Zomato: Is Swiggy's IPO Worth Subscribing To or Is Zomato the Better Buy?

Swiggy, the popular online food and grocery delivery giant, is all set to hit the market with its highly anticipated initial public offering (IPO), which opens for subscription on November 6. The company aims to raise approximately ₹11,327.43 crore from the primary market. Swiggy's IPO consists of a fresh issue of 11.54 crore equity shares worth ₹4,499 crore and an offer-for-sale (OFS) component of 17.51 crore shares, valued at ₹6,828.43 crore. The IPO is priced in the range of ₹371 to ₹390 per share, which would value Swiggy at $11.3 billion at the upper end of the price band. This is slightly above its valuation during the last funding round in 2022.  

Swiggy IPO listed peer, Zomato went public in July 2021 with a market capitalization of nearly $13 billion. Zomato's stock has soared since its listing, reaching over $25 billion (₹2.14 lakh crore) in market value by November 2024. Zomato shares have faced pressure recently but have delivered solid returns since its listing. The stock is down over 11% in the last month but has risen 23% in the past six months. Year-to-date, Zomato shares are up more than 95%, with a 109% gain in one year and over 285% in two years. 

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Swiggy vs Zomato: Analysts’ Perspectives 

Despite being fierce competitors in the food delivery industry, Swiggy and Zomato differ significantly in their financial performance and business strategies. Zomato has successfully turned profitable, boasting superior metrics in average order value (AOV), gross order value (GOV), and market share. Meanwhile, Swiggy has been grappling with losses for the past three financial years, with analysts raising questions about its ability to achieve profitability anytime soon.

According to a Mint Article, Akriti Mehrotra, Research Analyst at StoxBox highlighted, “Zomato exhibits higher market traction with a robust gross order value CAGR of 23.0% as opposed to Swiggy’s 15.5%. Its average order value growth also surpasses Swiggy’s, underscoring its operational effectiveness. While Swiggy’s IPO offers a chance for expansion, it’s unclear how well it will be able to close the gap with Zomato,” Mehrotra said.

The article also featured Anshul Jain, Head of Research at Lakshmisgree Investment and Securities. He said, “A major portion of Swiggy IPO comprises OFS, giving exit to early investors at high prices. Swiggy has been incurring losses and there is uncertainty around its profitability. On the other hand, Zomato is a relatively more stable and profitable company. At almost same revenue, Zomato is making profit and Swiggy is making losses. You are getting Zomato shares, a profitable company, at nearly the same revenue. Hence, it is advisable to avoid investing in Swiggy IPO and rather buy Zomato shares, which have higher revenue and profit clarity.”

Also read Should You Consider Investing in Swiggy IPO?

To Summarize

Swiggy’s IPO presents an intriguing opportunity for investors, particularly those seeking exposure to the growing food and quick commerce sectors. Swiggy faces significant competition from Zomato, which has already established a profitable and efficient business model. Investors may find Zomato’s stability and proven track record more appealing, especially given its market leadership and better performance metrics. Swiggy’s path to profitability remains uncertain, and analysts suggest caution for those considering the IPO, despite its potential for growth.