Online food delivery platform Swiggy’s Co-Founder and CEO Sriharsha Majety has said that all preparations are underway for its mega Initial Public Offering (IPO), through which it is likely to raise $1 billion later this year.
“We’ve been preparing for our IPO. We’ve added independent directors to the board and there are all kinds of preparations that are on,” Majety said.
For its IPO process, the company is likely to have enlisted seven investment banks, including Kotak Mahindra Capital, Citi, JPMorgan, BofA Securities, Jefferies, and others.
Swiggy is getting ready to go public after its competitor Zomato went public in 2021.
According to Majety, Zomato’s listing helped Swiggy gain a better understanding of retail investors and how they perceive the food delivery market.
“There is no denying that it (Zomato being listed) makes life easier for us. There’s much to learn in terms of how one manages communication as a public company, how one manages guidance as a public company, what gets more scrutiny and what doesn’t,” Majety said.
Meanwhile, according to a financial filing from Swiggy’s investor Prosus, the core food-delivery business of Swiggy experienced a 17% growth, achieving a gross merchandise value (GMV) of $1.43 billion in the first half of FY24.
Motilal Oswal Mutual Fund initiated an open market transaction on Monday, shedding 4.5 crore shares of the leading foodtech company Zomato.
According to data from the NSE, the mutual fund divested the shares at INR 138.15 per share in a block deal totaling INR 621.6 crore.
According to the shareholding information of the foodtech giant, Motilal Oswal Flexi Cap Fund possessed 15.94 crore shares, representing a 1.86% stake in Zomato as of the end of the December quarter in 2023.
The shares that inundated the market were acquired by BNP Paribas, Citigroup, Goldman Sachs, Morgan Stanley, and Societe Generale.
Societe Generale picked up 3.3 Cr shares at INR 138.15 apiece, while Goldman Sachs Investments (Mauritius) acquired 45 Lakh shares at the same price.
Morgan Stanley Asia (Singapore) acquired 39 Lakh shares, Citigroup Global Markets (Mauritius) bought 24 Lakh shares, and BNP Paribas Arbitrage obtained 12 Lakh shares, all priced at INR 138.15 each.
Amidst the block deal, Zomato shares saw a nearly 3% dip during early Monday trading. The stock eventually closed the session 4.44% lower at INR 133.40 on the BSE.
The development comes in the wake of brokerages HSBC, Goldman Sachs, and Jefferies raising their price targets (PTs) on Zomato. This adjustment is grounded in the anticipation of strong growth in Zomato’s food delivery and quick commerce verticals.
Goldman Sachs has adjusted its price target (PT) for Zomato, raising it to INR 160 from the previous INR 130. Similarly, Jefferies has increased its price target to INR 190 from INR 165, and HSBC has raised its target to INR 150 per share from the earlier INR 140.
Zomato achieved its first profitable quarter in Q1 FY24 and continued the trend with a profitable Q2. The company’s profit after tax (PAT) surged 18 times, reaching INR 36 crore in the September quarter, compared to INR 2 crore in the previous quarter.
The impressive financial figures have sparked a significant uptrend in the share price of the Deepinder Goyal-led startup. Over the past year, the stock has soared by 150.52%, and on a year-to-date (YTD) basis, it has registered a growth of 7.84%.
Wow! Momo Foods secured INR 350 crore in funding from Khazanah Nasional Berhad, Malaysia’s sovereign wealth fund. This represents the company’s most significant capital raise, coinciding with robust double-digit growth in the overall food services industry. The appeal of momos as a snack in India, coupled with competitive pricing, adds to the success of this fundraising effort.
The investment will involve both primary infusion and secondary purchase from early-stage investors, including the Indian Angel Network and Lighthouse Funds. Additionally, in this funding round, Oaks Asset Management, an existing investor, has injected an additional INR 60 crore.
Sagar Daryani, Co-Founder and CEO of Wow! Momo Foods, confirmed the development.
The round will provide an exit opportunity for angel investors associated with The Indian Angel Network (IAN) and enable series A investor Lighthouse Funds to partially divest, as stated by him. “We will strive to transform the food space,” he said.
Established in August 2008, Wow! Momo manages a network of 630 stores spread across over 35 cities. Approximately one-third of these stores are small-format or kiosk stores, situated in malls, tech parks, and hypermarkets. Wow! Momo has successfully created a distinctive presence for itself in a market with limited competition on a national scale, capitalizing on the widespread popularity of the cuisine in India. The company operates under three sub-brands: Wow! Momo, Wow! China, and Wow! Chicken.
The core fund will drive the brand’s growth and expansion, enhance distribution channels, and support research and development for its FMCG arm. The FMCG arm specializes in selling packaged frozen ready-to-eat momos through retail stores and e-commerce platforms.
Wow! Momo Foods Growth Strategy: 1,500 Stores in 100 New Cities
Daryani mentioned that the company is set to expand its reach to another 100 cities, with a target of establishing over 1,500 stores in the next three years.
Executives highlighted that the recent fundraising serves as evidence of renewed investor enthusiasm in the food services sector, despite increased competition and the entry of global brands into the Indian market.
According to Icra, India’s fast-food and quick-service restaurant companies are projected to add approximately 2,300 new stores between FY23 and FY25. This expansion plan is accompanied by an anticipated capital expenditure of around INR 5,800 crore, taking advantage of the growing affordability and heightened consumer demand for fast foods.
With a post-money valuation of over INR 2,400 crore, the company has garnered a total of INR 500 crore in funding to date, not including the ongoing round. The founders, promoters, and employees collectively retain a 45% ownership stake in the venture.
Coca Cola India and Reliance Retail unveiled a sustainability campaign named “Bhool Na Jana, Plastic Bottle Lautana,” according to a press release issued on Monday.
The focus of the initiative is on collecting post-consumption polyethylene terephthalate (PET) at Reliance Retail stores in Mumbai, utilizing Reverse Vending Machines (RVMs) and collection bins.
The launch of the initiative took place in the presence of Kazi Irfan, Officer on Special Duty (OSD) for Solid Waste Management at Brihanmumbai Municipal Corporation (BMC), at Reliance Retail’s Smart Bazaar store in Santa Cruz.
The initiative aligns with the central government’s Swachh Bharat Mission and has been launched in 36 Reliance Retail stores, including Smart Bazaar and Sahakari Bhandar stores in Mumbai and Delhi, as mentioned in the release.
Speaking on the launch, Damodar Mall, chief executive officer, Grocery Retail, Reliance Retail Limited, said, “Our pilot project with our store shoppers, and the support of Coca-Cola India and Reliance Industries, is an attempt to pursue with our wide network of stores.”
The sustainable project aims to reach 200 stores nationwide by 2025, targeting the collection of 500,000 PET bottles annually during the pilot phase.
“Through this partnership and platform, we are delighted that we can generate awareness and provide shoppers a convenient way to recycle their PET bottles while they are shopping at their Reliance store. Partnerships with retail, government, civic societies, and consumer-centric ideas like this one are a powerful multiplier for progress on collection, recycling, and reuse,” said Greishma Singh, vice president of Customer and Commercial Leadership, Coca Cola India (Southwest Asia).
Coca Cola India’s Previous Sustainability Initiatives
In October last year, Coca Cola India launched the Return And Recycle initiative with Zepto. It has seen the participation of 50,000 households in India and successful RVM installations across 75 cities in the country, collecting 1 tonne of PET waste.
Greggs, the well-known high street bakery chain, has unveiled plans to open up to another 160 stores in the year ahead as it cheered a strong end to 2023.
In 2023, the group expanded its presence by inaugurating 220 new stores, while also closing 33 and relocating 42. This resulted in a net gain of 145 new locations, bringing its overall estate to 2,473.
In 2024, Greggs plans to open a net total of 140 to 160 new shops, aiming to enhance customer accessibility to its stores.
In the fourth quarter, it recorded a 9.4% increase in like-for-like sales in its self-managed shops, contributing to an overall comparable store growth of 13.7% for the year 2023.
The performance in the last quarter indicates a deceleration compared to the 14.2% growth observed in the preceding three months. Greggs attributed this slowdown to a reduced contribution from price inflation.
The company said cost pressures were continuing to ease back, with expectations for a “more stable cost base in the coming year”.
“Wage inflation remains, although higher rates of pay across the economy will also provide support to consumer incomes,” according to the group.
Roisin Currie, chief executive of Greggs added, “We enter 2024 with plans to continue to invest in our shops and expand supply chain capacity.”
Oyo, the budget hospitality chain, announced on Monday its ambitious plan to unveil 400 new properties in major spiritual hotspots across the country. This expansion is propelled by the upswing in domestic travel and a burgeoning interest in spiritual tourism.
Oyo said it is set to launch 400 properties in popular destinations such as Ayodhya, Puri, Shirdi, Varanasi, Amritsar, Tirupati, Haridwar, Katra-Vaishno Devi, and the Char Dham route by the end of this year.
This move is in response to a 350% increase in searches for Ayodhya on the Oyo platform over the past year, prompted by the upcoming opening of the Ram Mandir on January 22, as stated by the company.
Oyo said that Ayodhya has consistently held the top position in searches on the Oyo app over the past year. On New Year’s Eve, the city experienced a 70% surge in Oyo app users, surpassing popular leisure destinations such as Goa at 50% and Nainital at 60%.
Last year, the company announced the launch of 50 homestays in Ayodhya to accommodate the increasing number of pilgrims, providing a total of around 1,000 rooms.
Oyo mentioned that these properties are strategically positioned near significant landmarks, ensuring convenient access to prominent religious sites and tourist attractions.
Oyo stated that it anticipates a swift sell-out of these rooms, given the substantial increase in demand for the destination.
Oyo has collaborated with the Ayodhya Development Authority and the Uttar Pradesh State Tourism Development Corporation for the establishment of these homestays.
Ritesh Agarwal, the founder and group CEO of Oyo, remarked that spiritual tourism in India is on the verge of experiencing a significant surge, positioning itself as one of the most substantial growth drivers for the industry in the next five years.
“The opening of the Ram Mandir in Ayodhya stands as a testament to this, and witnessing the excitement firsthand as I join in the grand ceremony will be truly humbling. This renewed fervour for spiritual journeys extends far beyond Ayodhya, with destinations like Puri, Shirdi, and Varanasi experiencing similar excitement,” he said.
“By offering comfortable and affordable accommodation options across these sacred sites, we aim to ensure every spiritual journey finds a welcoming haven, allowing pilgrims to fully immerse themselves in the transformative power of religion and spirituality,” he added.
Consumer goods companies are intensifying their advertising and promotional spending in the next few quarters, aided by the improvement in gross margins over the past three to four quarters due to lower input costs.
Fast-moving consumer goods (FMCG) companies, including Dabur, Marico, and Godrej Consumer Products, highlighted in investor notes that advertising, promotion, and category development spending witnessed a surge in the December quarter. Additionally, some anticipate a further increase in these expenditures in the upcoming quarters.
This year is brimming with events, and companies will eagerly seize the opportunity, according to B. Krishna Rao, Senior Category Head at Parle Products.
“In the next 10 days advertising spending will go up for Ram Mandir, then Lok Sabha elections and multiple sport events such as IPL, T20 World Cup and Olympics. At the same time, spending will also be increased to try to improve demand,” he said.
According to a report from BNP Paribas this week, the trend of gross margin improvement is expected to continue due to lower input costs. However, the report notes that advertising expenditures will remain high. It mentioned that FMCG firms advertise during sports events where advertising costs are relatively expensive.
Competitive Ad Spending by Consumer Goods Companies
In a report earlier this month, Nuvama Institutional Equities stated that for certain FMCG companies, advertising expenditures had surpassed pre-pandemic levels. With margins on the rise and a strategic drive to outperform local competition, advertising spending is expected to stay competitive in 2024, according to the report.
In an investor note last week, Dabur India indicated that gross margins are expected to increase, driven by the moderation of inflation and cost-saving initiatives.
“A significant portion of gross margin expansion will be channelled into enhancing advertising and promotion spends. Consequently, operating profit is expected to grow slightly ahead of the revenue and post an improvement in year-on-year operating margins,” it said.
Consumer goods companies allocate 3-14% of their sales budget to advertising and promotions.
Last week, Marico also mentioned that it increased advertising and promotion expenditures as part of its strategy to enhance the long-term equity of both the core and new franchises.
The sacred city of Ayodhya is set to welcome the nation’s first seven-star luxury hotel, exclusively catering to vegetarian cuisine. This city is also where the grand Ram temple is scheduled to be unveiled next Monday.
A Mumbai-based real estate firm is also planning to establish a five-star hotel in Ayodhya. Additionally, a housing project is scheduled to launch on January 22, coinciding with the day of the temple’s consecration ceremony.
The inauguration of the temple has catalyzed a cascade of development projects in the city, encompassing the construction of hotels and housing initiatives aimed at transforming it into a prominent hub.
An operational airport, connecting flights to Mumbai, Delhi, and other major cities, along with a renovated railway station, are already in place in the city. Additionally, starting this Friday, a helicopter service from Lucknow will be introduced.
It is reported that the renowned actor Amitabh Bachchan has acquired land in the upscale enclave known as ‘The Sarayu,’ situated approximately 15 minutes away from the temple.
While The House of Abhinandan Lodha (HoABL), a Mumbai-based developer, has not revealed the dimensions and worth of the plot, industry sources mentioned in reports suggest that the 10,000 sqft land could be valued at INR 14.5 crore.
Moreover, numerous five-star hotels are slated to be established along the banks of the Sarayu River. A total of 110 hoteliers, ranging from small to large enterprises, are acquiring land in Ayodhya to establish their facilities in the city. Additionally, there is ongoing construction of a solar park in the area.
Ayodhya is undergoing development as a Smart City, as previously mentioned by Bimlendra Mohan Pratap Mishra, a former royal and a member of the temple trust.
On Monday, the National Restaurant Association of India (NRAI) appealed to the government to reinstate input tax credit for restaurants. They proposed an increase in the GST rate from the existing 5% to 12% in anticipation of the upcoming Union Budget.
In a letter addressed to Finance Minister Nirmala Sitharaman, the NRAI emphasized the need for a just and fair e-commerce policy. They stressed the importance of balanced policies and regulations that foster a level playing field, allowing platforms to innovate, while ensuring the protection of restaurants, delivery partners, and consumers from potentially exploitative practices.
The restaurant industry, significantly affected by the pandemic, has shown great resilience in overcoming challenges and is currently on a steady path to recovery. According to a statement by the National Restaurant Association of India (NRAI), providing the sector with certain policy and budgetary support in the upcoming Budget could propel it towards an accelerated pace of growth.
NRAI Pushes for ITC Restoration
Seeking restoration of GST input tax credit (ITC), the industry body said, “It is the only industry to be pegged at 5 per cent GST without the availability of ITC; a feature designed to avoid cascading taxation”.
The lack of ITC not only reduces the operating margin of the business but also enhances the capital budget for a new project significantly. This increased project cost slows down the expansion plans, which massively impacts the overall growth of the sector, it added.
“The industry, therefore, recommends restoration of ITC to the restaurants while parallelly increasing the rate of GST to 12 per cent from the current 5 per cent,” NRAI said. It further said, “We understand that it may create a compliance burden on the smaller businesses, and therefore, we feel that this can be done on revenue slabs. While restaurants below a certain revenue threshold can continue with the current GST provisions, the organised sector with higher revenues and capex outlay may move towards the proposed GST regime”.
NRAI President Kabir Suri said the growth of the food services industry in India holds immense potential. The industry not only plays a pivotal role in contributing to government revenue but is one of the largest employers in the country.
“Balanced, fair and equitable policies by the government with respect to GST input tax credit, rationalised licensing norms and e-commerce policy will not only benefit businesses and consumers but also make a substantial contribution to overall economic growth and employment opportunities,” said Suri, who is also the co-founder & Director of Azure Hospitality Pvt Ltd.
On an equitable and fair e-commerce policy, NRAI said the online platforms, while bringing convenience, have also created concerns regarding fair competition and equitable growth. It also sought a grant of “industry status” to the food services sector, considering “the immense contribution” to the country’s economy.
“This will bring in multiple benefits through central or state industrial policies, including easier finance, special schemes, subsidies, fast-track clearance processes etc. It will also encourage enterprise as well as entrepreneurship,” the letter to the Finance Minister said.
NRAI Calls for License Streamlining
NRAI also called for the streamlining of licenses and NOCs, pointing out that, on average, a restaurant needs to obtain 15-25 licenses/NOCs to initiate and run an outlet.
“This myriad of licences and permits inhibits food businesses in growing beyond their core geographies and adds to the operational complexity and compliance burden,” it said.
The industry body also asked the finance minister for targeted subsidy schemes and access to debt financing for SMEs to consider subsidies on essential ingredients, utilities, and waste management to reduce operational costs for struggling restaurants, particularly in smaller towns and cities.
It also asked the government to consider allowing longer working hours for the restaurant sector and reducing GST on bagasse and other eco-friendly materials that are used as packaging material for home delivery.
A number of Domino’s Pizza outlets in the Delhi-NCR region have now joined the Open Network for Digital Commerce (ONDC). This strategic move is expected to assist Jubilant FoodWorks, the franchise owner, in bolstering profit margins and reducing the long-term dependence on online sales platforms such as Zomato and Swiggy.
Even though Domino’s outlets can be found on PhonePe’s Pincode app, they remain absent from other consumer platforms within the network, such as Paytm and Ola. SnackFax previously reported that the pizza chain has been actively incorporating ONDC as a sales channel since the year 2023.
While the majority of restaurants have joined ONDC through seller-side platforms like Magicpin, Growth Falcon, and e-Samudaay, Domino’s has independently connected with the government’s e-commerce network. This allows Domino’s to avoid paying fees to an intermediary for its presence on ONDC.
The ONDC model dissects the e-commerce value chain into various components, including the buyer-side app, gateway, seller-side app, and logistics providers. Any application, whether it’s an e-commerce platform, banking app, D2C app, or ride-hailing app, has the potential to function as a “buyer-side app.” In this role, consumers can log in to search for products and finalize transactions.
Likewise, a “seller-side” app serves as a platform where individuals or businesses, such as fashion brands, wholesalers, retailers, restaurants, cab drivers, kirana stores, and home service providers like plumbers or electricians, can register to offer their goods or services. An e-commerce platform has the option to function as both a buyer and seller app, or it may choose to operate exclusively in one of these capacities.
ONDC is viewed as a counterbalance to the dominance of Swiggy and Zomato in food delivery, Ola and Uber in ride-hailing, and Amazon and Flipkart in online retail.
As per ONDC, reduced commissions within the network are anticipated to result in more economical prices. Sellers such as restaurants, grocery shops, and electronics brands are expected to extend these benefits to consumers by offering more affordable products.
In December, sources close to the matter revealed that ONDC achieved a milestone by surpassing 5 million transactions in a month, encompassing both ride-hailing and retail purchases.
Out of the 5.5 million transactions facilitated by ONDC in December, 2.1 million were categorized under retail, while the remaining 3.4 million fell within the mobility sector. Among retail transactions, a third were dedicated to food delivery and fashion purchases, with the remaining orders spanning newer segments such as cosmetics and electronics.
The current distribution of retail purchases marks a significant shift from the transaction breakdown in early 2023. During that period, retail constituted a mere 5-10 percent, while the mobility category overwhelmingly dominated with 90-95 percent of all ONDC transactions.
In the course of 11 months, retail transactions on ONDC have witnessed a substantial increase, rising from 1,281 in January to 2.1 million in December.
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