Swiggy to scale up food delivery initiatives as Q2 revenue grows

“Through constant innovation and sharper segmentation, from our ‘High-Protein’ and ‘No Added Sugar’ categories to ‘Deskeats’ across tech parks and ‘Food on Train,’ we’re ensuring every consumer finds an option tailored to their needs. Moreover, initiatives like ‘Bolt,’ focusing on speed, and the ‘99 Store’, focusing on affordability, make food delivery as seamless and accessible as possible," Kapoor said.

During the quarter, the food delivery arm—Swiggy’s second-biggest business by revenue—is said to have recorded the fastest growth in two years, adding one million new users, Kapoor noted.

The gross order value (GOV) in the segment grew to ₹8,542 crore in the September quarter, against ₹7,191 crore in the year-ago period, within the guided range. Its average monthly transacting user base grew 17% to 17.2 million, from 14.7 million in the previous year.

Swiggy has rolled out several pilot initiatives in recent years, aiming to gradually increase the average order value (AOV) and accelerate new customer acquisition. It launched ‘NoSugarAdded’ earlier this month, targeting health-conscious customers. In August, DeskEats went live in over 7,000 corporate buildings nationwide, enabling office-goers to access food options from 2 lakh partner restaurants.

Affordability factor

The Bengaluru-based company plans to keep affordability at the centre of its new initiatives. It launched 99 Store in July, offering quick-preparation dishes at ₹99. “With the affordability of meals likely to be the single largest unlock for the food delivery category, it is incumbent upon market creators like us to try multiple approaches and see what can succeed, even if it means disrupting the status quo. We believe that our ability to scale up a new proposition, if it achieves product and business market fit, is superior as we have a fully established and scaled tech and operational stack," the firm said in its September quarter letter to shareholders.

The 99 Store is now available in over 500 cities and currently contributes a high single-digit percentage of Swiggy’s food order count.

This comes at a time when competitive intensity in the food delivery segment is on the rise, with new players like Rapido’s Ownly and smaller venture capital-funded startups like Swish emerging in recent months. Overall consumption for online food ordering has also softened, highlighting concerns of a saturating market.

Both Eternal and Swiggy have made strides to keep up with the competition by lowering subscription fees or reducing minimum order value. However, the subsidised deliveries were offset by a hike in the platform fee.

“Despite the recent narrative on platform fee hikes leading to rising costs, the total cost of service for users as a percentage of average order value has remained consistent over the last three years. The growth in monthly transacting users accelerated to 17.2% YoY, and the double-digit YoY order growth was the highest in two years," Kapoor added.

Swiggy, in its shareholders’ letter, added that growth remains its “overarching priority" and will continue its progress towards achieving a guided steady-state margin of 5% of gross order value.

Eyeing profitability

“While Swiggy sustained its food delivery growth at 18.8% YoY, it was broadly in line with Zomato’s (Swiggy had outperformed Zomato in the past two quarters). Nonetheless, users grew 22.2% YoY to 17.2 million during the quarter. Swiggy’s innovation in food delivery is noteworthy amid Bolt (in 700+ cities) and Toing (a value app), and 99 Store, as affordability is the key to unlock growth," said Karan Taurani, analyst at Elara Securities.

On Thursday, Swiggy reported another unprofitable quarter this fiscal, weighed down by increased spending on its quick commerce arm, Instamart, highlighting the tough road to profitability in the rapid delivery sector. Its net loss widened to ₹1,092 crore against ₹626 crore in the year-ago period and reported an operating revenue of ₹5,561 crore, a 54.4% year-on-year jump, surpassing the ₹5,280 crore average estimate of analysts surveyed by Bloomberg.

The company is mulling raising up to ₹10,000 crore through a qualified institutional placement (QIP) and other permissible routes to fortify its balance sheet and maintain flexibility in India’s fiercely competitive quick commerce market. This comes almost a year after listed rival Eternal Ltd raised ₹8,500 crore via QIP, and less than two weeks after Zepto raised $450 million in private capital from California Public Employees' Retirement System (CalPERS).