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Indian food delivery startup Swiggy is set to reduce its workforce by approximately 400 employees, constituting nearly 7% of its staff, as part of the company's effort to enhance its financial position in preparation for an anticipated IPO later this year. This marks the second round of job cuts for the Bengaluru-based startup, with a similar number of jobs being cut in the early part of the previous year.
The decision to downsize comes as Swiggy aims to strengthen its financial performance. While the food delivery segment has been profitable for several quarters, the overall company has yet to achieve profitability. In contrast, Swiggy's chief rival, Zomato, attained profitability last year.
With an IPO on the horizon, industry experts suggest that retail investors will closely compare Swiggy to Zomato, emphasizing the need for Swiggy to outperform its older rival on various metrics to secure a favorable valuation. Zomato currently holds over 60% of the Indian food delivery market, based on app user count, as noted by AllianceBernstein.
Despite repeated attempts to seek comments, Swiggy did not respond to inquiries. The layoff news was first reported by Indian newspaper ET.
In recent quarters, Zomato has expanded its market share lead over Swiggy, growing faster post-COVID-19 and gaining ground in both user base and Gross Merchandise Value (GMV). Zomato's wider market penetration, strong execution, and content funnel have contributed to its market dominance, particularly in Tier 2+ cities. As of the first half of CY23, Zomato's food delivery GMV stood at $1.7 billion, compared to Swiggy's $1.4 billion, according to AllianceBernstein. Zomato has also seen growth in annual transacting users and monthly active users.
The layoff decision suggests Swiggy's commitment to optimizing its operations and financials as it faces intense competition in the Indian food delivery market and aims for a successful IPO performance.
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