Swiggy and Zomato (Eternal Ltd) Show Contrasting Fund Utilization Strategies Post-Fundraising

Indian food delivery leaders Swiggy and Eternal Ltd (formerly Zomato) are demonstrating contrasting strategies in how they utilize significant funds raised in 2024. Swiggy, after raising ₹11,327 crore through an IPO (₹4,359 crore fresh capital), has spent ₹2,852 crore (62%) on debt repayment, expanding its quick-commerce arm Instamart's dark stores, and marketing. It plans to raise another ₹10,000 crore via QIP. Eternal, having raised ₹8,436 crore through a QIP, has utilized ₹2,946 crore (35%) by the September quarter, primarily on dark store expansion (₹1,039 crore), corporate expenses (₹942 crore), marketing (₹636 crore), and technology (₹329 crore). Eternal has parked the majority of its funds (₹5,491 crore) in safe assets like government securities and bank deposits, prioritizing profitability and gradual growth.

Impact This divergence in spending indicates different growth philosophies. Swiggy's aggressive approach suggests a focus on rapid market share capture, potentially leading to higher near-term expenses but aiming for long-term dominance. Eternal's conservative strategy suggests a focus on sustainable profitability and operational efficiency, building customer loyalty through improved service and network expansion rather than aggressive discounting. This could lead to slower growth but potentially a more stable business model. The market will watch which strategy yields better long-term returns for investors. Rating: 7/10

Difficult Terms: Dark stores: Small, often unbranded, warehouses located in urban areas used exclusively for fulfilling online orders, typically for groceries or convenience items, enabling faster delivery. IPO (Initial Public Offering): The process by which a private company offers shares of stock to the public for the first time, becoming a publicly traded company. QIP (Qualified Institutional Placement): A method for listed companies in India to raise capital by issuing equity shares or other securities to a select group of institutional investors, such as mutual funds, pension funds, and insurance companies, without making a public offer. Government securities: Debt instruments issued by the central or state governments to borrow money, considered very safe investments. Fixed deposits: A financial instrument offered by banks that provides investors with a fixed rate of interest over a specified period. Quick-commerce: A rapidly growing segment of e-commerce focused on delivering small orders, typically groceries and convenience items, within a very short timeframe, often 10-30 minutes. Burn rate: The rate at which a company spends its available cash reserves, especially a startup or a company in a growth phase.