Swiggy Expands Dark Stores and Boosts IPO Plans Amid Competition

Bengaluru-based Swiggy, a leading player in the food and grocery delivery market, is taking significant steps to enhance its operations as it gears up for its initial public offering (IPO). The company recently filed its red herring prospectus with the Securities and Exchange Board of India (Sebi), aiming to raise ₹11,300 crore through this public offering. A key focus of their strategy involves investing ₹755.4 crore to expand their dark store network, which is crucial for their quick commerce division.

Dark stores are essentially warehouses that facilitate faster deliveries, and Swiggy plans to increase its count from the current 605 to 741 dark stores, covering approximately 2.59 million square feet. This move comes in response to fierce competition from rivals like Zomato and Blinkit, which have also been ramping up their dark store operations. As of September, Blinkit reported having 791 dark stores, showcasing the competitive landscape in the quick commerce space.

The latest IPO filing reveals that Swiggy has increased its targeted fundraising through new share issuance to ₹4,499 crore, up from the initial ₹3,750 crore. The company also intends to sell 175.1 million shares in the offer-for-sale (OFS) window, a slight reduction from the previously planned 185.3 million shares. This adjustment indicates that Prosus, Swiggy's largest investor, has scaled back its divestment from 118.2 million shares to 109.1 million shares.

As Swiggy prepares for its IPO, market observers are eagerly anticipating the announcement of the share price band, expected to fall between ₹371-390 per share. At the upper end of this range, the company could be valued at approximately $11.3 billion. In comparison, Swiggy's listed competitor, Zomato, boasts a market capitalization of around ₹2.22 lakh crore (about $26.5 billion) as of Tuesday.

Swiggy's focus on quick commerce is evident in its revised investment strategy. The company has allocated ₹1,179 crore to this segment, a significant increase from the earlier budget of ₹982 crore. This reflects the growing competition and demand for rapid delivery services, with customers increasingly seeking delivery times of just 10 to 20 minutes.

In addition to expanding its dark store network, Swiggy plans to invest ₹703.4 crore in technology improvements, including enhancing cloud infrastructure and optimizing logistics. Moreover, the company will allocate ₹317.7 crore for marketing efforts aimed at bolstering its presence in the market, particularly for Swiggy Instamart, its grocery delivery service.

The IPO has garnered strong interest from both domestic and global investors, with firms such as BlackRock, CPPIB, and SBI Mutual Fund showing enthusiasm for the offering. As competition heats up in the food and grocery delivery market, Swiggy is positioning itself for growth and sustainability, reflecting its commitment to meeting the evolving needs of consumers across India.

With the rapid changes in the landscape of food delivery services, Swiggy's strategic investments and expansion plans may well set the stage for its continued success in this fast-paced industry.