Swiggy, an Indian food delivery startup, is laying off about 400 employees which equates to nearly 7% of its workforce. The goal is to enhance financial stability ahead of a proposed IPO scheduled for later this year. This marks the company’s second round of layoffs, with the first happening early last year.
While Swiggy’s food delivery segment has been profitable for several quarters, the startup as a whole hasn’t reached profitability. This draws a contrast with its main competitor, Zomato, which achieved profitability last year.
Investment bankers and mutual fund investors think Swiggy will have to supersede Zomato in several areas to obtain a favourable valuation if they want to appeal to retail investors during their listing. Swiggy did not respond to requests for comment on the layoffs.
Zomato and Swiggy together dominate the Indian food delivery market. However, recent reports from UBS and AllianceBernstein show that Zomato has extended its lead in market share. The research note released by AllianceBernstein on Wednesday showed that Zomato commands over 60% of the Indian food delivery market based on app user count.
AllianceBernstein analysts wrote;
Post covid, Zomato has grown faster than Swiggy — both from a user base & GMV perspective driven by strong execution, wider penetration (Zomato is present in 750+ cities as compared to ~600 cities for Swiggy) and stronger content funnel.
In the past three months, Zomato has incrementally gained ~100bps in market share in terms of monthly active users (MAUs). From a GMV perspective, Zomato holds ~54% share in food delivery as compared to Swiggy at 46% as of 1HCY23, Zomato’s food delivery GMV stood at $1.7Bn as compared to Swiggy’s $1.4Bn. Zomato has been a gainer in Tier 2+ cities as well as some Tier 1 cities — which has led to a higher MAU base for Zomato. Zomato had 58Mn annual transacting users in CY22, with food delivery segment exhibiting18.4Mn MTUs in Q2FY24.
