About Swiggy Limited

Swiggy is a new-age, consumer-first technology company offering users an easy-to-use convenience platform, accessible through a unified app - to browse, select, order and pay for food (“Food Delivery”), grocery and household items (“Instamart”), and have their orders delivered to their doorstep through their on-demand delivery partner network. Their platform can be used to make restaurant reservations (“Dineout”) and for events bookings (“SteppinOut”), avail product pick-up/ dropoff services (“Genie”) and engage in other hyperlocal commerce (Swiggy Minis, among others) activities. Being among the first hyperlocal commerce platforms, Swiggy has successfully pioneered the industry in India, launching Food Delivery in 2014 and Quick Commerce in 2020, and due to the pioneering status of Swiggy, it is well-recognised as a leader in innovation in hyperlocal commerce and as a brand synonymous with the categories it is present in.

The company augment the value proposition to users through their membership programme called “Swiggy One” providing discounts and offers; in-app payment solutions like digital wallet “Swiggy Money” (a pre-paid payments instrument), “Swiggy UPI”, and Swiggy-HDFC Bank credit card for additional benefits. They offer comprehensive business enablement solutions to restaurant partners, merchant partners (that sell grocery and household items on their platform) and brand partners including their alliance partners such as analytics-backed tools to enhance their online presence and user base; fulfilment services for streamlining their supply chain operations; and last-mile delivery.

The Company have a technology team of 930 employees, comprising of skilled engineers, designers and computer scientists whose expertise spans a broad range of technical areas, as of June 30, 2024. The Bankers of the Swiggy Limited are ICICI Bank Limited and HDFC Bank Limited.

Indian Food Services Market
The Indian food services market comprises online Food Delivery and Out-of-home Consumption which was ₹5,600 billion (US$70 billion) as of 2023. The online Food Delivery market is the fastest growing segment within the food services market and is expected to grow at 17-22% between 2023 and 2028. In the Out-of-home Consumption market, the organised segment and the online dining out segment are expected to grow at 15-18% and 46-53% respectively between 2023 and 2028. Both online Food Delivery and Out-of-home Consumption markets are growing on the back of rapid increase in share of organised restaurant supply unlocking demand in the Indian market.

Traditional cultural preferences of home-cooked food and supply-side constraints of restaurants given higher price per meal have limited the size of the food services market in India which is 9-12% of the total food consumption as of 2023, whereas the same for markets like USA and China, which have higher share of organised supply, is 55-60% and 37-42% respectively. The food services market comprises Out-of-home Consumption (dining out and takeaways) and online Food Delivery. India’s food services market is growing faster than the home-cooked or grocery market (fresh foods like fruits, vegetables, dairy and meat, staples and packaged foods) leading to a change in the traditional trends of food consumption in the country.

As of 2023, the top 60 cities (Metro2 and Tier 1 cities3 ) contribute over 56% of the total food services market. For a growing base of urban and young consumers, increasing purchasing power has led to increased frequency and improved quality of eating out, making restaurant food consumption a norm rather than a luxury. Consumers with busy schedules have limited access to home-cooked food, having moved away from their families, which habituates them to order food or dine out frequently. These lifestyle changes are expected to persist, leading to growth in the number of consumers and occasions of eating out, thereby amplifying the need for good quality food outside of the home.

Moreover, the value of restaurant food is significantly higher than home-cooked meals as it factors in the added value of quality, experience and uniqueness provided by businesses. Hence, as penetration of food services increases, the market expands disproportionately. 

The share of organised food services in the overall food services market in India grew from 35-40% in 2018 to 40- 45% in 2023 and is expected to reach 55-60% by 2028. This market includes all forms of food consumption from branded restaurants (registered restaurants with valid licenses to run food businesses in India) and is sized at approximately ₹2.2-2.5 trillion (US$28-32 billion) as of 2023. However as of 2023, the restaurant industry in India is still highly unorganised with 70-75% of the 2-2.5 million restaurants being unorganised. The significant need gap in organised supply of restaurants in India is emphasised by the restaurant penetration per capita in USA and China markets as of 2023 being 1.5 times and 5 times of India respectively. The organised food services market comprises online Food Delivery and organised Out-of-home Consumption markets.

Online Food Delivery :- The online Food Delivery market in India grew from ₹112 billion (US$1.4 billion) in 2018 to ₹640 billion (US$8 billion) in 2023 and is expected to become a ₹1400-1700 billion (US$17-21 billion) market by 2028P, growing at a CAGR of 17-22%. Of the total market in 2023, the share of top 60 cities (metro and Tier 1) is 75-80% which shows the large untapped potential beyond these cities which will drive growth as penetration of online Food Delivery increases. Growing availability of organised restaurant supply and increased online penetration is expected to drive growth in online Food Delivery market beyond the top 60 cities. Within the top 60 cities, the urban consumer base is still underpenetrated and a rise in the number of users along is expected to grow the market. The growing need for convenience and variety fuels demand, while the rapid expansion of the restaurant industry, driven by increasing number of organised restaurants, strengthens supply. Consequently, the growth of organised and affordable offerings is expected to unlock demand previously constrained by the lack of relevant and abundant supply.

The growing trend of consumers using online Food Delivery platforms is evident with penetration of online Food Delivery services rising to 11% in 2023 from 3% in 2018. However, despite this growth, in comparison to other wellestablished online food service markets, there remains considerable untapped potential in India for further growth which is evident from the significantly lower frequency of ordering food online as people are accustomed to homecooked meals. With growing availability of organised supply, affordability, increasing occasions of eating out, increasingly busy lifestyles of consumers and rapid urbanisation, Indians are expected to order food online more frequently.

Growing prominence of these platforms among consumers has led to the establishment of a resilient consumer base, with 80-85 million Annual Transacting Users (“ATUs”) in 2023. Notably, a substantial 25-29% of ATUs are Monthly Transacting Users (“MTUs”) in 2023 which is expected to increase to 27-32% by 2028, underscoring the frequent and habitual ordering behaviour. The inelastic and loyal nature of this demand is evident in the steadily expanding consumer base, despite diminishing marketing spends. Of these 20-25 million MTUs, 70-80% reside in the top 60 cities, representing a significant share of growing urban consumers that value convenience.

With the rising prominence of these platforms and urban migration, new user acquisition is steadily happening in metro cities and is expected to continue. In the approximately ₹2.3-2.6 trillion (US$29-33 billion) food services market beyond the top 60 cities as of 2023, hyperlocal commerce platforms are seeing rapid growth as the market is underpenetrated (5-6% online penetration) and presents a large untapped opportunity for growth in the long run. The absence of a robust restaurant network and diverse culinary options in smaller towns and rural areas dampens consumer interest in online food ordering. However, these challenges represent an untapped market potential for online Food Delivery platforms in the long term. By addressing supply gaps and enhancing consumer awareness, online Food Delivery platforms can unlock significant growth opportunities beyond the top 60 cities, thereby expanding their market reach and driving revenue growth. Based on the above confluence of factors, the MTUs in Online Food Delivery are expected to increase to 35-45 million by 2028.  

The Average Order Value (“AOV”) (average monetary value of a single order pre-discount and including taxes, customer delivery charges but excluding tips) for the industry has also climbed from approximately ₹290-320 (US$3.6- 4.0) in 2018 to approximately ₹425 (US$5.3) in 2023. Apart from inflation, this surge is attributed to supply-side innovations like higher presence of premium restaurants, more premium dishes and on the demand side this is caused by increasing disposable incomes, increased appetite for experimentation and a change in the consumer base with a larger proportion of families opting for online food ordering. Globally as well, PPP-adjusted AOVs are significantly higher at ₹600-650 (US$7.5-8.1) and ₹750-800 (US$9.4-10.0) in the USA and UK, respectively, signalling clear headroom to grow in the future.

With the largest consumer base globally, the Indian food services market is primed to see fast-paced growth with increasing number of organised restaurants widening the demand that was constrained by supply-side limitations. In essence, these platforms act as catalysts, driving the share of organised food services market (in the overall food services market) which has grown from 35-40% in 2018 to 40-45% in 2023 and is expected to continue growing to reach 55-60% by 2028. Moreover, the emergence of concepts like virtual kitchens, alternatively known as cloud kitchens (kitchens designed for online Food Delivery specifically and as such, lacking any consumer storefronts) which have grown from approximately ₹15 billion (US$0.2 billion) in 2018 to approximately ₹80 billion (US$1 billion) in 2023 is a testament to the ecosystem cultivated by online Food Delivery platforms. 

Out-of-Home Consumption :- Beyond just delivery, offline dining out experiences are also being disrupted to capture the evolving demand. The organised Out-of-home Consumption market grew from ₹1.3 trillion (US$16 billion) in 2018 to ₹1.8 trillion (US$23 billion) in 2023.

As the currently sparse and fragmented organised supply landscape of India undergoes rapid development to capture the large growth headroom, the dining out market is ripe for digital disruption. India is at an early stage of category development, presents significant opportunities for innovation. Online Food Delivery platforms can provide diningout oriented solutions with limited variable costs and strong incremental revenue generation for restaurants. Further, the large existing consumer base of online Food Delivery is naturally inclined to use these solutions on the same platforms for their dining out needs, which in turn leads to more restaurants getting onboarded, thereby creating a network effect. These solutions provide diverse options for various use-cases, extending beyond food to encompass enhanced and dynamic experiences that unlock additional revenue streams.

These solutions not only offer convenience, affordability and timely reservations for the consumers, but also lead to increased consumer stickiness and better demand planning for the restaurants. With the share of branded (registered organised restaurants with valid licenses to run food businesses in India) restaurants (excluding cloud kitchens) of the total number of restaurants increasing from 15-20% in 2018 to 25-30% in 2023, the relevance of dining-out oriented solutions for restaurant discovery has increased significantly. Most of these branded restaurants are present on online Food Delivery platforms as online discovery has become increasingly important to attract a wider consumer base with digitally-native consumers turning to these platforms for dining out decisions. These platforms also provide restaurants with the ability to enhance their brand value through consumer reviews and engagement, based on the quality of the service reducing the need for marketing spends. Moreover, the high AOVs along with relatively higher (gross) margin capture potential increase the attractiveness of the segment for online Food Delivery platforms. Given the AOVs here are at least four to five times that of the online Food Delivery segment and the gross margins are significantly higher given the only direct costs involved are the payment gateway costs and smaller overheads (mostly tech maintenance costs), this segment enjoys high profitability and operating leverage.

Dining out experiences today are enhanced by social events that take place at the restaurants. The growing demand for these events has led to multiple opportunities for the platforms. From musical jams to social mixers, a wide range of curated events and experiences extend the touchpoints with the consumers, while also building renewed interest and attention for the restaurants. This has enhanced consumers’ restaurant discovery needs which were traditionally limited to finding good quality food and now involve finding high quality events taking place at restaurants.

Due to the confluence of the above factors, online dining out market size is expected to grow at a CAGR of 46-53% to reach ₹320-400 billion (US$4-5 billion) by 2028 witnessing high adoption from existing online Food Delivery users as well as expansion of restaurant partner network with existing access from Food Delivery segment. As a result, the penetration of the online dining out market in the organised Out-of-home Consumption market is expected to increase from ~3% in 2023 to ~10% in 2028, which still has large headroom for penetration in addition to the share of organised segment increasing. 

Currently, a very small percentage of dining out visits are reserved (in advance) as Indian consumers are habituated to walking in and finding tables at restaurants. However, with rapidly growing premiumisation of the dining out experience, demand surge on specific meal slots, limited seating at popular restaurants in urban areas and growing popularity of Out-of-home Consumption, reservations are gaining prominence as has been the case in developed markets for decades.

Online is already becoming a preferred mode to make dining reservations as it is convenient, effective and quick. The need for making reservations is expected to grow to keep up with rapidly growing consumer demand, which points to the growth headroom for online-based table reservation facilities. 

SWIGGY LIMITED COMPETITIVE STRENGTHS
1. Pioneers of high-frequency hyperlocal commerce categories driven by an innovation-led culture 
2. A consistently growing network of users
3. Rising user engagement on their platform 
4. “Swiggy” brand delivered through a unified app with consistent user experience
5. A preferred choice for restaurant partners, merchant partners, brand partners and delivery partners
6. The platform has created synergetic network effects driven by their wide user and partner base.
7. An experienced professional management team and high standards of governance 

SWIGGY LIMITED STRATEGIES
1. Retain and grow user base by expanding their offerings and growing their partner network
2. Expand Dark Store footprint and basket-sizes for Quick Commerce 
3. Improve their contribution margin by scaling their operations, and expanding high margin offerings and revenue streams 
4. Invest in their technology backbone and optimise their last-mile network to enable efficient scaling of operations to service more users
5. Invest to enhance their brand recall, improve traffic on their app, and increase engagement across businesses 

SWIGGY LIMITED RISK FACTORS & CONCERNS
1. They have incurred net losses in each year since incorporation and have negative cash flows from operations
2. If they fail to retain their existing user base or fail to acquire new users in a cost-effective manner, the business, financial condition and results of operations could be adversely affected. 
3. If they fail to retain their existing or acquire additional restaurant partners, merchant partners and brand partners in a cost-effective manner, the business, financial condition and results of operations could be adversely affected. 
4. Managing their Dark Stores is critical to their Quick Commerce business and failure to do so in a cost-effective way.
5. They have limited experience in operating their business at its current scale, scope, and complexity. 
6. They are yet to identify the exact locations or properties for the setting up Dark Stores, for which they intend to utilise the amount from Net Proceeds.
7. They operate a convenience platform, and amounts paid for food and products ordered through their platform are passed through to restaurant partners and merchant partners.
8. They operate in a market which has traditional preference for home-cooked food and faces supply-side constraints in terms of restaurant network, affordable pricing and diverse culinary options.
9. They depend on mobile operating systems for their operations