How does fast trading work? And what are the prospects for players like Swiggy, which has offered its shares for sale to individual investors this week?

In the food delivery and quick commerce space, Swiggy generates revenue in the form of (i) commissions charged by partner restaurants/retailers for sales made through the Swiggy app; (ii) advertising revenue from restaurant/retailer/brand partner partners (enabling preferred advertising/placement of a product or service on the app when customers search); (iii) fees charged to Users and Delivery Partners for use of the Technology Platform; and (iv) subscription revenue from the Swiggy One membership program. The main contributors here are (i) and (ii).

One of the differences between fast commerce and food delivery is that Swiggy incurs costs by investing in supply chain and distribution networks encompassing warehouses and hidden stores to provide fulfillment services to brands and to franchisees (distributors) to enable delivery of groceries and other products.

In the B2B supply chain sector, the business model is different, with most of the revenue coming from selling goods to wholesalers and retailers, and the rest coming from services for now, while the company intends to increase the service component from now on with a focus on margins. .

A large part of Swiggy’s success depends on increasing its number of users/subscribers, increasing their engagement/transactions with current Swiggy app offerings, as well as monetizing this base of users. users with innovative new offers and taking a larger share of the consumer wallet. Expanding a food delivery client to a fast commerce client is one such innovative offering that has done well. Increased customer engagement also means more advertising revenue, which can further drive growth. In FY24, Swiggy had 14.29 million monthly transacting users (MTU), up from 10.26 million in FY22.

According to an RHP report that cites Redseer Strategy Consultants, the online food delivery market in India stood at ₹60,000 crore, or $7.1 billion in FY23, with the potential to grow growing at around 20% CAGR to reach 1.5 lakh crore by FY28. Players like Swiggy and Zomato can grow at or above the industry growth rate if they execute well .

“Incredibly high CAGR potential”

At the same time, it estimates the potential for an even more staggeringly high CAGR of 60-80% in the fast trade sector (from levels of ₹22,400 crore in FY23) through FY28.

It is unclear whether Swiggy or Zomato can grow at or above the industry growth rate in this segment, given the presence of new competitors such as Zepto, BigBasket and possibly aggressive entries from Amazon and Reliance. Nonetheless, Swiggy is well positioned to exploit this huge opportunity and rapid commerce is one of the aspects where much of the growth answers that Swiggy can generate lie. About 45 percent of the proceeds from the IPO are intended for directly related investments. to trade quickly with the company that plans to expand dark stores matter in existing as well as in new cities.

Can Swiggy be one of the mega winners? This is the $10 billion (₹87,000 crore) question investors will need to answer before Swiggy IPO opens this week on November 8. Swiggy’s ₹11,327 crore IPO (of which the new issue is ₹4,499 crore), will value the company at a market capitalization of ₹87,000 crore and an enterprise value (EV) of 78,000 crore ₹. And once this IPO concludes, the heated and heated competition between Swiggy and Zomato will extend to the capital markets as well.