Swiggy to lay off around 400 employees once again ahead of planned IPO: Report

Swiggy layoffs: Food delivery giant, Swiggy, is set to reduce its workforce by about 400 employees, constituting nearly 7 per cent of its total staff, as part of its efforts to bolster its financial standing in anticipation of an upcoming initial public offering (IPO) later this year, Techcrunch reported.

This marks the second round of job cuts for the Bengaluru-based startup, with a similar-sized reduction in staff occurring early last year. The move aligns with Swiggy's strategic plan to enhance its financial metrics, especially considering its rival, Zomato, achieved profitability in the previous year.

While Swiggy's food delivery segment has consistently posted profits, the company has yet to achieve overall profitability. The competitive landscape with Zomato, which has gained a market share advantage in recent quarters, intensifies the pressure on Swiggy to demonstrate robust financial performance for potential investors during its IPO.

Investment bankers and mutual fund investors suggest that Swiggy will undergo close scrutiny from retail investors, drawing inevitable comparisons with Zomato. To secure a favorable valuation, Swiggy must outperform its older rival on various financial metrics.

Zomato currently holds over 60 per cent of the Indian food delivery market based on app user count, according to a note by AllianceBernstein. The report highlights Zomato's incremental growth in market share, driven by factors such as wider penetration (present in 750+ cities compared to Swiggy's ~600 cities), strong execution, and a robust content funnel.

AllianceBernstein analysts noted, "Post-covid, Zomato has grown faster than Swiggy — both from a user base and GMV perspective." In terms of monthly active users (MAUs), Zomato gained ~100bps in market share in the past three months. From a gross merchandise value (GMV) perspective, Zomato holds a 54 per cent share in food delivery, while Swiggy stands at 46 per cent as of 1HCY23.

Zomato's food delivery GMV reached $1.7 billion compared to Swiggy's $1.4 billion. The report underscores Zomato's success in Tier 2+ cities and some Tier 1 cities, contributing to a higher MAU base. In CY22, Zomato had 58 million annual transacting users, with 18.4 million monthly transacting users in Q2FY24.