Swiggy posts 65-fold increase in losses
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Bengaluru: Food delivery start-up Swiggy (Bundl Technologies Pvt. Ltd) posted a near 65-fold increase in losses for the fiscal year ended March 2016, indicating heavy cash burn and poor unit economics in food start-ups.
Swiggy’s revenue rose to Rs23.59 crore for the year ended 31 March from Rs11.59 lakh a year earlier. Of this, Rs20.14 crore was revenue from operations and the rest from other income.
Losses bulged to Rs137.18 crore from Rs2.12 crore in fiscal 2015, the company’s filing with the Registrar of Companies shows. Total expenses stood at Rs160.77 crore, implying that Swiggy burnt about Rs13 crore per month in FY16.
The company started operations in August 2014, which implies that its fiscal 2015 revenue of Rs11.59 lakh and loss of Rs2.12 crore was for seven months of operations until 31 March. However, revenue, as well as losses surged as the company scaled up and expanded into several cities.
Swiggy and Zomato Media Pvt. Ltd are two of the largest companies in the food delivery space.
Consumer internet start-ups, including the likes of Flipkart, Snapdeal and Ola, traditionally burn cash in their early years to quickly achieve scale.
Swiggy’s cost of operations ballooned to Rs47.06 crore in FY16 from Rs2.12 lakh a year earlier, while other expenses surged to Rs55.37 crore from Rs95.75 lakh.
Employee costs rose to Rs54.25 crore from Rs1.24 crore in FY15.
The company did not respond to an email seeking comment.
Swiggy is one of the most well-funded home-grown food start-ups. The company has so far raised about $75.5 million from Accel Partners, SAIF Partners, Norwest Venture Partners and Bessemer Venture Partners, among others, second only to Zomato’s $224 million among home-grown food technology startups.
Swiggy competes with the likes of Zomato, Foodpanda India and Runnr (Carthero Technologies Pvt. Ltd), the entity created after the merger of food delivery start-up TinyOwl Technology Pvt. Ltd and hyperlocal delivery start-up Roadrunnr.
Food start-ups are among the segments worst hit by the slowdown in funding, which prompted companies to hold back on expansion while burning huge amounts of cash to lure customers through offers and discounts.
Some investors released cash only when certain business goals were achieved.
Some food start-ups such as Dazo and Eatlo shut shop, while others were acquired. For instance, hyperlocal grocery delivery start-up Grofers bought Spoonjoy.
While companies such as DoorDash and Postmates have made it big in the US, food delivery has turned out to be a challenging business in India, mainly because of low average order value and high delivery costs.
According to industry experts, the average order value for food in the US is around $20, about four times the average Rs300 (about $4-5) in India.
As a result, delivery firms in India, which charge clients a commission of 10-20% of the order value, end up losing money as each delivery costs more than Rs50.
Swiggy faces stiff competition from Zomato, which entered the food delivery business in April last year.
In an interview with Mint in December, Zomato co-founder Deepinder Goyal said the company will invest $40 million in its food-ordering business over the next six months to capture a dominant share of the market in India and the United Arab Emirates.