Business News/ Companies / Start-ups/  Swiggy's food delivery business turns profitable: CEO

New Delhi: Homegrown food aggregator Swiggy turned profitable as of March, paving way for food tech platforms that have for long struggled with high costs of operating their business to swing to profit.

Swiggy's chief executive and founder, Sriharsha Majety, in a blog post on Thursday said that the company’s sharp focus on innovation, coupled with strong execution helped it achieve profitability, which factors in all corporate costs, excluding employee stock options.

“We have reached this milestone while bringing tremendous benefits to all partners in our ecosystem. Our core value that the customer comes first has consistently been reciprocated with deep consumer love and industry-best NPS scores, repeat and retention rates. We continue to make strides in gaining customer favour, including strong traction in tier 2 and 3 markets. Our teams are more in sync than ever with restaurant partners to improve their experience with Swiggy and create mutual wins. As a result, our restaurant NPS has improved by over 100% in the past eight quarters," Majety said.

India’s trajectory of eating out and food delivery is still in “early days", he said. Swiggy is very sanguine about the growth potential over the next two decades.

The online food delivrey firm has also made “strong progress" on the profitability of its quick-commerce business under Instamart. “We’re on track to hit contribution neutrality for this three-year-old business in the next few weeks," he said.

Swiggy forayed into food delivery ecosystem in 2014 after three friends Sriharsha Majety, Nandan Reddy, and Rahul Jain decided to start the service. Despite the widespread adoption of ordering food online, many have questioned the economics of the industry citing it as an unviable business model, Majety said.

Swiggy and Zomato dominate the country’s online food delivery market.

Last year, Swiggy acquired Dineout, and as of today Dineout is the leader in the dining out category with more than 21,000 restaurant partners across 34 cities.

Swiggy will continue to make “responsible" and “measured" interventions to fuel further growth in food delivery. There are many underserved geographic and consumer segments and our goal remains to outpace industry growth by continuously investing in the right levers said.

“As our investments in food delivery are starting to pay off successfully , we’re also very excited about the trajectory of our quick commerce business, Instamart…Instamart is one of the leading players in the quick commerce space globally. In addition, we’ve also made strong progress on the profitability of the business and we’re on track to hit contribution neutrality for this three-year-old business in the next few weeks," Majety said.

To be sure, food consumption in India was estimated at over $600 billion in 2020. Most of this, though, was driven by home-cooked food. Food services, defined as non-home cooked food or restaurant food is still highly under penetrated in India and contributes only about 10% to the overall food consumption market.

The news of the company’s food delivery business swinging to profitability comes days after US-based fund manager Invesco slashed Swiggy’s valuation from $8.2 billion to $5.5 billion.

In January, Swiggy laid off 380 employees citing challenging macroeconomic conditions and slowdown in growth of its food delivery business. It also moved to shut down some of its non-performing verticals to cut costs.

Startups across the board have been forced to re-look at their cash burn and employee costs after a funding winter made it harder for companies to raise fresh investments. Startup deal volume in India plunged to a near nine-year low in February, Mint reported earlier.

Majety said the company expects to reach more such milestones in the coming quarters.

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Updated: 18 May 2023, 02:44 PM IST
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