Swiggy vs Zomato: India's Food Delivery IPOs

The food delivery sector in India has exploded over the last decade, with two key players, Swiggy and Zomato, at the forefront. These companies have revolutionized the market and attracted immense interest from consumers, investors, and competitors alike. Zomato made history by going public in 2021, becoming one of India’s first tech unicorns to be listed. Swiggy, meanwhile, opened its IPO on November 6, 2024. Here’s an in-depth look at how these two giants compare on financials, business models, and market performance.

1. IPO Launch and Key Figures

Zomato IPO: In July 2021, Zomato launched its IPO with a valuation of ₹9,375 crore at ₹76 per share. The IPO was oversubscribed multiple times, reflecting the strong demand and confidence in India’s emerging tech and startup sectorChittorgarh.com.
Swiggy IPO: Swiggy’s IPO, set at ₹371-390 per share, aims to raise ₹11,327 crore, making it one of the largest IPOs in recent years. The price band and overall valuation reflect Swiggy’s status as a close competitor to Zomato and an essential player in the Indian food delivery landscapeIndia Today.

2. Financial Performance and Market Position

Revenue and Profitability:

Zomato has leveraged its vast user base and delivery network to show stable financial growth. For FY2023, Zomato reported a revenue of approximately ₹7,079 crore, marking a significant increase from its revenue in FY2021. It also diversified its revenue streams with the acquisition of Blinkit, a quick-commerce platform, which contributed to Zomato’s growth. While Zomato has posted losses in the past, its focus on efficiency and user retention has led to better margins and projections of profitability.
Swiggy saw revenue growth as well, with its earnings climbing to ₹11,634 crore in FY2024, up from ₹8,714 crore in FY2023. However, Swiggy reported a loss of ₹2,350 crore in FY2024, underscoring its challenges with profitability, despite higher average order values (AOV) compared to ZomatoChittorgarh.comIndia Today.

Market Share and User Base:

Zomato has a slight lead in terms of market share, holding around 55% of the Indian food delivery market, compared to Swiggy’s 45%. Zomato also boasts a larger active monthly user base of 20 million compared to Swiggy’s 14 million, though Swiggy’s AOV is slightly higher, suggesting potential for higher per-user revenue.
Swiggy has strengthened its position with a focus on its quick-commerce arm, Instamart, which saw significant growth. This segment represents a growth area with untapped potential in the online grocery delivery spaceChittorgarh.comIndia Today.

3. Business Model and Competitive Edge

Both companies have adapted similar business models focusing on three primary revenue streams:

Food Delivery: The backbone of both companies, where they earn from delivery charges, commission from restaurants, and membership programs.
Quick Commerce: Zomato acquired Blinkit to enter this space, while Swiggy launched Instamart. The quick-commerce segment has the potential for high growth but presents challenges in logistics and profitability.
Advertising and Subscription Services: Both companies have introduced subscription models (Zomato Pro and Swiggy One) that offer discounts, free deliveries, and additional services for a monthly fee.

4. Key Financial Metrics

Price-to-Earnings (P/E) Ratio: Zomato’s P/E ratio at the time of its IPO was challenging to calculate due to negative earnings, as the company was still operating at a loss. Swiggy, similarly, has a negative P/E ratio, which reflects ongoing profitability challengesIndia Today.
Gross Order Value (GOV): Zomato’s GOV exceeds Swiggy’s by approximately 25%, largely due to Zomato’s broader user base and efficient delivery infrastructure.

5. Growth Prospects and Challenges

The Indian food delivery market is projected to grow at a CAGR of around 20% over the next five years, driven by increasing urbanization, internet penetration, and changing consumer behavior. Both Swiggy and Zomato are well-positioned to capitalize on this growth, but they face several key challenges:

Path to Profitability: Both companies need to manage high operating costs, especially given the low margins in food delivery. Zomato’s acquisition of Blinkit represents a step toward revenue diversification, but integrating quick-commerce into the core business remains challenging. Swiggy’s profitability hinges on scaling Instamart and expanding its user base without substantially increasing costs.
Customer Retention and Loyalty: Zomato Pro and Swiggy One have been instrumental in driving repeat usage, but both companies need to balance offering discounts with achieving profitability.
Regulatory Landscape: The Indian government has been considering regulations around data privacy and e-commerce, which could impact operational costs and delivery logistics for both companies.

6. Investor Sentiment and Stock Performance

Zomato’s Stock Performance: Since its listing, Zomato’s stock has seen significant volatility but recently has stabilized with positive year-to-date returns. Investors are optimistic about Zomato’s potential, especially due to Blinkit’s growth prospects in the quick-commerce segment.
Swiggy’s IPO Appeal: Swiggy’s IPO, though attractively priced, has received mixed reviews from analysts. Experts point out Swiggy’s losses and advise caution for those looking for short-term gains, as Swiggy will need time to narrow the gap with Zomato in terms of profitabilityChittorgarh.comIndia Today.

Conclusion: Which is the Better Investment?

For long-term investors, Zomato currently offers a more stable proposition due to its established market share, diversified revenue streams, and steady improvements in operational efficiency. However, Swiggy’s IPO represents an opportunity for those looking to tap into a high-growth, albeit higher-risk, investment. Swiggy’s quick-commerce expansion and the growing popularity of Swiggy One could prove beneficial if it can achieve the cost efficiencies seen in Zomato.

Both companies have set ambitious targets, and the real test will be their ability to maintain growth while achieving profitability. Investors will need to keep an eye on how effectively each player adapts to regulatory changes, economic shifts, and evolving customer preferences in India’s dynamic food delivery market.