Swiggy has declared that its main food delivery business has become profitable, eclipsing its listed rival Zomato on another key parameter, a day before the company reports its quarterly results.
The Bengaluru-based startup, which counts Prosus Ventures, SoftBank and Invesco among its investors, became profitable in March this year, it said. However, Swiggy does not factor in the costs of employee stock options in the expense.
“Swiggy has become one of the few global food delivery platforms to achieve profitability in less than 9 years since its inception,” Sriharsha Majety, co-founder and CEO of Swiggy, wrote in a blog.
At the business level, Swiggy is still not profitable. The startup is burning more than $20 million a month on its instant grocery delivery business, called Instamart, according to two people familiar with the matter. This is after the company significantly reduced its spending on Instamart in recent quarters.
Majety confirmed that Swiggy has made “disproportionate investments” in Instamart, “given the attractiveness of the consumer proposition and its strategic importance”, but stated that the “peak” of its investments “is behind us”.
«Instamart is one of the main players in the fast commerce space globally. Additionally, we have also made great progress in the profitability of the business and are on track to achieve contribution neutrality for this 3-year business in the coming weeks,” he wrote.
The update, shared a day before loss-making Zomato reports its results, is a much-needed boost for Swiggy, which has seen its valuation slashed by at least two of its investors in recent months.
At stake is the $20.000 billion Indian food delivery market, which has seen several consolidations and exits in recent years. Uber sold its food delivery unit in India to Zomato, while Amazon exited that business in the country late last year.
«Faced with a market with high growth potential (~45% CAGR growth), Indian food delivery platforms are in an advantageous position to achieve profitability, given the low cost of labor in India . So in the end, both Swiggy and Zomato could co-exist in a duopoly market structure. “The food delivery market in India has evolved since before 2014, when food delivery in India was plagued by many problems of unreliable delivery, high minimum orders and poor restaurant selection,” wrote the Bernstein analysts in a report last month.
«Food aggregators have invested in logistics (better delivery time, efficient routes, lower delivery costs) while cloud kitchens have focused on evolving consumer trends (demand for fresh, hygienic and healthy meals ).»
