Swiggy’s food delivery business has turned profitable, excluding employee stock option costs, its chief executive wrote in a blog post on Thursday, overtaking rival Zomato a day before it is scheduled to report its quarterly earnings.
“This is a milestone for food delivery globally, not just for us, as Swiggy has become one of the very few global food delivery platforms to achieve profitability in less than nine years since its inception,” CEO and co-founder Sriharsha Majety said.
Earlier this year, Swiggy reported that annual losses more than doubled during the financial year 2022, hurt by higher expenses, even as more people used the food delivery platform.
While the company had not shared details on its current fiscal, Swiggy’s food delivery business orders reported a growth of 38% in the first six months of FY23, according to a report by Prosus, one of its biggest investors.
With the rising use of smartphones and attractive discounts on offer, food delivery platforms have become increasingly popular in India. Currently, the segment, which is expected to breach the $10-billion GMV mark by 2025, is dominated by two players–Swiggy and Zomato.
However, now the entry of Open Network for Digital Commerce (ONDC), which allows restaurants to sell food directly to consumers through buyer apps, is expected to disrupt the food delivery business. By leveraging the power of technology, ONDC aims to provide a level playing field to all players in the digital commerce space, reducing the dependence on large aggregators like Swiggy and Zomato.
To gain a bigger share of the market, both Swiggy and Zomato have been experimenting in other areas, including grocery delivery, which includes players such as Zepto, Dunzo, and Zomato-owned Blinkit.
For Swiggy’s quick commerce business Instamart, Majety said, “The peak of our investments is behind us.” He added that the business is on track to hitting contribution neutrality in the next few weeks.
Swiggy’s profitability announcement comes as two of its investors recently slashed its valuation — Baron Capital by 34% to $7.1 billion and Invesco by 33% to $5.5 billion.
In the last quarter, Zomato reported a quarterly loss that widened nearly five times year on year, citing a challenging demand environment for the food delivery business.
“We still feel confident about reaching adjusted EBITDA break-even (excluding quick commerce) by Q2 FY24 as per our earlier estimate…The current slowdown in demand was unexpected, which is impacting the growth in food delivery profits, but despite that, we think we are in a good position to meet our profitability goal,” Zomato CFO Akshant Goyal said in the company’s quarterly earnings call ended Dec 2022.
“Starting in 2014, food delivery was our first foray and core offering toward our mission. While there were anywhere between 10-12 players trying to solve it, the economics of the industry were constantly questioned, with many viewing it as an unviable business model,” Majety said.
