Swiggy’s IPO: Can it take down Zomato?



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Today on The Daily Brief:

  • Will Swiggy hit a sixer like Zomato?
  • Are India’s semiconductor dreams becoming a reality?
  • Will our groceries become expensive?

Will Swiggy hit a sixer like Zomato?

Swiggy, the popular food delivery giant, is gearing up for one of the most talked-about IPOs in India’s startup scene. If you’ve been keeping an eye on the market, you know this is a big deal—especially after the IPOs of Zomato and Paytm.

Swiggy is looking to raise ₹3,750 crore by issuing new shares, with additional shares being sold by investors like Prosus and Accel, bringing the total IPO size to over ₹10,000 crore.

But the big question is: how does Swiggy stack up against its main rival, Zomato? What makes Swiggy different?

Let’s break it down.

Swiggy plans to use the funds from its IPO for a few key projects. First, they’re setting aside ₹982 crore to expand Instamart, their quick-commerce service that promises grocery deliveries in under 30 minutes. This means a major push into opening more dark stores, which are small warehouses designed for speedy deliveries.

On top of that, another ₹930 crore will go towards marketing and brand promotion. The message is clear: Swiggy is doubling down on grabbing more market share, especially in the competitive quick-commerce space.



Interestingly, Swiggy was the first major player to jump into quick commerce in India with Instamart. That early start should’ve given them an edge, right? But then Zomato shook things up by buying Blinkit, which now holds about 40% of the market, compared to Instamart’s 32%. Zepto also joined the race, adding even more competition.



While Instamart has boosted Swiggy’s presence, it’s only their third-largest source of revenue. On the other hand, for Zomato, quick commerce has become their second-biggest money-maker, largely thanks to Blinkit’s rapid growth.





Looking at the bigger picture, Swiggy and Zomato have diverse business models, but their revenue sources differ a bit.

Food Delivery : This is still the main focus for both. In Q1 FY25, Swiggy’s food delivery gross order value (GOV) hit ₹10,189 crore, growing 23%. But Zomato outpaced them, growing 53% to ₹15,455 crore. Zomato is leading here, with 18 million monthly active users compared to Swiggy’s 12 million.



Quick Commerce : This is where things heat up. Instamart saw revenues of ₹403 crore, a strong 90% increase. But Blinkit more than doubled that, with ₹942 crore in revenue, growing 145%. The take rates—basically, how much they earn from each order—also tell a similar story: Blinkit’s take rate is 19.1%, while Instamart’s is 14.8%. Despite Swiggy’s early start, Zomato has jumped ahead in this space.

B2B Supply Chain : Swiggy’s B2B services, including warehousing and logistics, brought in ₹1,268 crore in Q1 FY25, making it their second-largest revenue stream. Zomato’s equivalent, Hyperpure, is growing but still smaller in comparison.

One of Zomato’s biggest strengths is profitability. In Q1 FY25, Zomato posted a net profit of ₹253 crore, while Swiggy reported losses of ₹611 crore. Even Blinkit’s losses are smaller compared to Instamart’s, giving Zomato a slight edge in terms of efficiency.

Both Swiggy and Zomato dominate India’s food delivery market, but Zomato is currently leading in both food delivery and quick commerce. Blinkit’s aggressive growth and better efficiency have helped it pull ahead of Instamart. Although Swiggy has 557 dark stores for Instamart, the fight for market share is still on, especially in Tier 2 and Tier 3 cities, where the next big growth is expected.

Swiggy’s quick-commerce journey goes back even further. Remember Scootsy? Swiggy bought the premium food delivery service in 2018 to focus on high-end restaurants. While Scootsy didn’t change the game, it did help Swiggy expand its offerings, especially in Mumbai, before it was eventually merged into Swiggy’s main platform.

So, what’s next for Swiggy?

As Swiggy gears up for its IPO, it’s got a strong growth story to share. With a mix of revenue streams, an early start in quick commerce, and a solid user base, Swiggy has a lot going for it. However, Zomato’s lead in both food delivery and quick commerce means Swiggy still has some catching up to do.

The next few years will be crucial. Both companies will continue to battle, especially in quick commerce, where growth in India’s smaller cities could make a big difference. How Swiggy handles these challenges will be key to whether its IPO meets the hype.


Are India’s semiconductor dreams becoming a reality?

Now let’s dive into Tata’s big bet on semiconductors and why it could be a game-changer for India’s tech future.

Right now, India’s chip-making industry is still pretty underdeveloped. We’ve made some strides in assembling, testing, and packaging chips, but the actual manufacturing part? We’re not quite there yet. But Tata is looking to change that and is making some bold moves.

But before we dive into that, if you’re wondering what the heck a semiconductor chip is and why it’s such a hot topic, here’s a quick 10-second explainer:

Think of semiconductor chips as the “brains” behind all your electronic devices. They process information, store data, and control how our devices work. From your smartphone, computer, and car, to even your washing machine—semiconductor chips are what make these devices “smart” and able to handle complex tasks.

Now, back to Tata. They’ve recently teamed up with Powerchip Semiconductor Manufacturing Corporation (PSMC), one of the world’s top chip makers, to build India’s first semiconductor fabrication plant, or fab, in Dholera, Gujarat.

By the way, don’t mix up PSMC with TSMC—they’re both Taiwanese chip companies, but TSMC is the largest in the world, while PSMC ranks 7th. Tata’s partnership is with PSMC.



So, why is this partnership such a big deal? PSMC will help Tata with everything from design to transferring key technologies to India. This fab will produce up to 50,000 wafers per month—those are thin slices of semiconductor material that eventually become the chips powering our devices.

Tata is pouring a massive ₹91,000 crores into this project. But it’s not just about building one factory; they’re setting up an entire ecosystem for semiconductor manufacturing in India, potentially creating 20,000 skilled jobs initially, with plans to scale up even more.

But why should we care?

Semiconductors power almost every piece of tech we use, and right now, India relies heavily on imports. Tata’s fab will make logic chips, which are super important for tech like AI and high-performance computing. With the global chip shortage, Tata’s move could position India as a key player in the global semiconductor market in the long run.

But it’s not going to be a walk in the park. Companies like TSMC and Samsung have spent decades perfecting their manufacturing, and even they still face challenges. That’s why Tata’s partnership with PSMC is so crucial—it’s the boost they need to get this off the ground in India.

Looking ahead, Tata plans to build multiple fabs in Dholera, which could create over 100,000 jobs. However, there’s a catch—India has always faced a shortage of skilled workers, especially in high-tech fields. The good news? Tata is tackling this head-on by investing in workforce development as part of the project! They’re planning hands-on training for Indian engineers at PSMC’s facilities in Taiwan to ensure they have the skills to operate these complex fabs.

In short, Tata’s big semiconductor push could be a major leap towards India becoming a key player in the global chip supply chain. As the demand for chips keeps growing, this could set India up as an essential alternative supplier in the future.



Will our groceries become expensive?

Motilal Oswal recently released a report on commodity prices, pointing out some trends that investors should keep an eye on. Here’s a quick rundown of what’s happening.

First up, agricultural commodities are getting pricier. Wheat prices are up 11% compared to last year, and barley has jumped by 15%. This isn’t great news for companies like United Breweries and Nestlé, which depend heavily on these ingredients. Coffee prices are also rising, up 14%, which could mean higher costs for brands like Nestlé and Hindustan Unilever.





So, what does this mean for us? It’s likely these rising costs will eventually be passed on to us as consumers, meaning our grocery bills could go up soon.

Next, let’s talk about the edible oil market. Import duties on oils like palm, soybean, and sunflower have risen from 0% to 20%, and refined oil duties are now at 32.5%. While this move is designed to support local producers, it’s putting pressure on FMCG companies like Britannia, Dabur, and Marico, which use these oils. As a result, we might start seeing price hikes on items like biscuits and cooking oils.

But it’s not all bad news. Prices of non-agricultural commodities, especially crude oil, are cooling off—they’re down 7% from last year, mainly due to China’s economic slowdown. This is good for companies like Asian Paints and Pidilite, which could see better margins thanks to lower raw material costs.

However, inflation is still a challenge for FMCG companies. Key inputs like wheat, sugar, and milk are up about 4% from last year, putting pressure on giants like Hindustan Unilever and Britannia. To protect their margins, we might see more price increases on everyday products in the coming months.



So, while some sectors might catch a break, inflation is still hitting the food and FMCG space hard. We should brace ourselves for more price hikes on household goods soon.


Tidbits

  1. ChrysCapital is set to buy Theobroma Foods and Belgian Waffle Co for a combined ₹3,200-3,500 crore. They’re looking to build a consumer brand investment platform, tapping into India’s growing food market, which is projected to reach ₹7.76 lakh crore by FY28.
  2. Appario Retail, once Amazon India’s top seller, has gone to court to challenge the CCI’s antitrust investigation, which accuses Amazon and Flipkart of favoring select sellers. This could set a trend for other companies fighting regulatory actions.
  3. OpenAI is restructuring into a benefit corporation to attract investors and potentially hit a $100 billion valuation. This comes after some leadership changes and aims to balance AI growth with ethical considerations.
  4. India announced a small wage hike for informal sector workers starting October 1, to keep up with rising living costs, with adjustments linked to inflation trends.
  5. Accenture reported Q4 2024 revenue of $16.41 billion, driven by demand for generative AI solutions, and announced a $4 billion share buyback, showing strong confidence from investors.

Thank you for reading. Do share this with your friends and make them as smart as you are :wink:

If you have any feedback, do let us know in the comments

3 Likes

The real fact is this company is loss making at 611 cr. The narrative is about revenue, market share, B2B etc

This is a OFS of 10,000 but I believe they will retain 930 cr. Basically meaning, the promoter taking his money off on a Loss Making company.

investigation accuses … of favouring

or appario retail … accuses … of favouring
?

Could you add sources or more links to go through?
thanks

Appario Retail is challenging the CCI’s accusation, by denying such favouritism.

This is how I interpret it.

Since the CCI’s antitrust investigation is accusing Amazon and Flipkart of favoring select sellers. It seems, Appario Retail being one of the alleged beneficiary of such favouritism, is denying such beneficial treatment by challenging the CCI.

My doubt is, is it not the responsibility of Amazon and Flipkart to challenge this and prove they haven’t done anything wrong ?, why would the sellers unnecessarily want to get involved in this. It is merely an accusation now, they would have to wait for the final judgement to actually take it to court.

There have been allegations that e-commerce giants manipulate sales in favour of specific sellers on their platforms. A Reuters report revealed that in 2019, of Amazon’s 400,000 sellers in India, a measly 35 were responsible for about two-thirds of its online sales. And Amazon held equity stakes in several of these sellers, blurring the lines between being a middleman and acting as a direct seller.

Because there is a history to it. Why is Appario going to court? because of this:
Amazon Appario Retail: Amazon India to delist top seller Appario, renews JV with Frontizo - The Economic Times (indiatimes.com)

Frankly Appario is just a front for Amazon.
Long story short - When Amazon (and flipkart started) they were selling the products with massive discount, using the money their mother company (or investor) provided. Thus undercutting local vendors and getting customers hooked to its platform.

Govt didn’t like this, so they were like hey you cannot have FDI in multi-brand retail. So you cannot bring foreign money and use it to sell products on discount. That forced these Behemoth to become market place - logic was, hey we are just market place we provide technology, anyone can come and sell on our market place.

Problem is how to fund the discount? I mean no one was buying products in amazon because they weren’t available anywhere else. People were buying it because they were sold at massive discount. So to continue the growth, someone still needs to sell at huge discounts (and probably at a loss).
So Amazon smartly created seller organization like Cloudtail, Appario and few others. Each was a JV with local Indian partner (Catamaran ventures, Patni etc.), but majority ownership as well as control was with Amazon (probably flipkart did same, but I am not following it, so not have full details)
Amazon projected these as separate entities and used them to sell products on its marketplace. Amazon also provided preferential treatment (less comission, faster/cheaper logistics etc.) to these sellers so they can sell cheap and provide “discounts”.

At some point govt woke up saying, hey you are doing the same thing which we prohibited in first place - selling products directly and using foreign money to discount it.

It seems Amazon accepted govt argument and started disbanding these JVs. They closed down Cloudtail and declared Appario will go down too.

Now it appears either they or Patni bros are having change of heart and want to challenge govt decision, and hence going to court.
Hope this back story helps :slight_smile:

3 Likes

Yeah, as if its delisting makes a big difference, they are just taking the attention away from Appario for now, anyways some other seller (JV company) will take its place.

that multiple new sellers firms have taken over Cloudtail’s business on Amazon, and they all have a common link – they are all run by former executives of Cloudtail and Appario.

While Frontizo will continue its services, Appario Retail may offer seller onboarding services on the Amazon India marketplace. This is similar to Prions core business.

For now, these sellers(JVs) too seem to be making losses despite the bigger revenues, so don’t know what’s the logic behind that. Market share first, and profit is next ?

I thought the very purpose of entering into such JVs and selling products (despite the prohibition) through Amazon was to actually double their profits.

i.e., They run their normal E-commerce business and make commissions as usual and on the other hand, they can act as Sellers for trending and fast moving products and make a quick profit out it.

Their biggest asset seems to be the DATA that they have collected over the years, they know everything about customer’s buying habits, their taste and preferences, the fast-moving products etc…

I believe their aim is to monetize this data by becoming Direct sellers (which they aren’t supposed to do) by duplicating such popular/fast moving products.

Globally, Amazon’s direct sales model, which deals directly with manufacturers, has been highly profitable. In 2018, 58% of Amazon’s physical goods sales came from third-party merchants, with the rest from direct sales. This model gives Amazon greater control over its product range and pricing – and it’s a strategy the giant is keen to replicate in India despite regulatory barriers

I keep hearing that they are trying to undercut competition by offering deep discounts.

But who are the competitors here ?

The competition here, doesn’t seem to refer to other e-commerce operators like Flipkart etc, rather they seem to refer to the third-party sellers on their platform.

What kinda logic is this?
How can the sellers, who bring in the revenues for Amazon, by paying commissions, become a competitor?, aren’t these sellers the customers of Amazon ?

Isn’t their direct competitors actually the other e-commerce platforms ?

I see that small retailers are the ones getting affected by this strategy of predatory pricing / deeps discounts.

Amazon seems to be allowing such small retailers to list and sell their products on its platform, but indirectly, Amazon is trying to duplicate these products by selling a similar product at a cheaper price through its Surrogate brands, making it hard for the small retailers to compete. (find buyers for its products)

Am I right?, is this the modus operandi ?

If the idea behind giving deep discounts is to promote its own products indirectly, how long can they keep taking losses ?.

What’s their end game, how are they planning to turn their business profitable ?

1 Like

Retail storer, mom and pop stores, physical stores.

No idea that’s for Amazon to decide :slight_smile:

I think they thought that they will undercut for couple of years and people will get hooked to them. That is where they can reduce discount and start making money.
Unfortunately, they underestimated:

  1. Indian penchant for best deal. Indian consumer doesn’t mind checking prices at multiple places and buying from one offering lowest. So habit forming never actually worked (which is opposite from American consumer, who are not as price conscious as we are)
  2. So much competition coming in from new players with deep pockets (like Jio, tata …)