Indian food delivery giant Swiggy is set to cut approximately 7% of its workforce, amounting to around 400 jobs, in a strategic move aimed at bolstering financial performance ahead of its planned IPO later this year. This marks the second round of layoffs for the Bengaluru-based startup, following a similar downsizing initiative early last year.
Financial Struggles and Competitive Landscape: Despite achieving profitability in its food delivery business for several consecutive quarters, Swiggy remains unprofitable at the group level. The intensified competition with its chief rival, Zomato, has added pressure, as Zomato reported turning profitable last year. Analysts and investors anticipate a close comparison between the two giants during Swiggy’s IPO, with Swiggy needing to outperform Zomato on various metrics to secure a favorable valuation.
Swiggy’s Valuation and Investor Sentiment: With a valuation of $10.7 billion in its recent funding round, Swiggy faces high expectations from both investment bankers and mutual fund investors. The layoff decision, though not officially commented on by Swiggy, aligns with the company’s effort to optimize its operations and streamline costs.
Market Dynamics and Zomato’s Dominance: Zomato and Swiggy currently lead the Indian food delivery market, but recent data indicates Zomato’s expanding market share lead. UBS and AllianceBernstein report that Zomato commands over 60% of the market based on app user count. The analysts highlight Zomato’s impressive growth post-COVID, driven by a larger user base, wider geographic penetration (750+ cities compared to Swiggy’s ~600 cities), and a robust content funnel.
Market Share and Metrics: Zomato’s incremental gain of approximately 100 basis points in market share over the past three months further solidifies its dominance. From a Gross Merchandise Value (GMV) perspective, Zomato holds a 54% share in food delivery, compared to Swiggy’s 46% as of the first half of CY23. Zomato’s food delivery GMV stands at $1.7 billion, surpassing Swiggy’s $1.4 billion. The growth is evident in both Tier 2+ and some Tier 1 cities, contributing to a higher Monthly Active User (MAU) base for Zomato.
Conclusion: Swiggy’s decision to trim its workforce reflects the intense competition in the Indian food delivery market and the necessity to strengthen financials for its upcoming IPO. The looming comparison with Zomato and the market’s expectations for Swiggy to outperform underscore the challenges the company faces in securing a favorable valuation. As the rivalry between the two giants continues, the evolving market dynamics will shape the future landscape of food delivery services in India.
Read More On: Thestartupscoup.Com
