Daybreak - How Swiggy prepared for its IPO

Episode Date: November 14, 2024

On November 13, food delivery giant Swiggy made its public debut. It listed with a 8% premium over its IPO price of Rs 390 on NSE at Rs 420 and was oversubscribed by nearly four times. While it's a bit early to comment, investors are not making strong bets on it yet. Hust to give you context, when Zomato went public, its IPO was oversubscribed by 38 times. This could be because the company is still posting losses on a consolidated level and is expected to be 2-3 years away from reaching profitability. It took Swiggy nine years till its food delivery business finally turned profitable last year.Today, we revisit an episode of Daybreak in which we’d talked about what was happening behind the scenes of Swiggy’s IPO preparation.Tune in.Daybreak is now on WhatsApp at [phone]. Text us and tell us what you thought of the episode!Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

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Preparing a company for an IPO is a bit like getting your house in order before you throw a dinner party. You know, you need to tidy up, make sure all your dishes are plated well. You get the drift. The idea is ultimately to leave your guests impressed. And yesterday, Swiggy threw the big. dinner party for an internet company this year. It wanted to raise more than a billion dollars through its public offering and it listed at an 8% premium over its IPO price of 390

on the National Stock Exchange or NSC. The company listed at 420 rupees and was oversubscribed by nearly four times. While it is a little too early to comment, investors are not making strong bets on it yet. Just to give you context, when Zamato went public, its IPO was over-subscribed by 38 times. Now, this could be because Swiggy is still posting losses on a consolidated level and is expected to be about two to three years away from hitting profitability. It took the company nine years till its food delivery business arm turned profitable. So today, I'm going to take you back to revisit an episode of Daybreak in which we had spoken about what happened behind the scenes of Swiggy's IPO preparation.

Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nickda Sharma, and I don't chase the new cycle. Instead, every day of the week, my colleague Rahal Philipose and I will come to you with one business story that is worth understanding and worth your time. Today is Thursday, the 14th of November. targets targets targets it's all about daily weekly and monthly targets in swiggy offices right now for example on the revenue side category teams have been given larger targets like increasing orders and average order value or improving the market share on a city level and then there are other sub-targets and this time the leadership

is way more involved with meeting these targets an employee of swiggy spoke to my colleague, the Ken reporter Ayusha Garval, and they told him that now vice president and senior vice president level bosses are handling things that used to be earlier taken care of by those who were at the business head level. And how does this help? The idea basically is to close any pending or new matters stuck due to lack of coordination faster by quickly aligning their respective teams. For employees, this means there is little or no room for everyone. In fact, another employee told us that in some cities, especially where Zumato is big, teams have been pulled up for underperformance for a three-hour dinner slot.

Earlier, this wasn't even being done for the entire day's performance. In the last seven or eight months, some employees have also been nudged to quit by being put on performance improvement plans. And then there is cost-cutting, of course. Swiggy is making no compromises there. discounts and delivery partners onboarding and payouts, it's all being reduced monthly to the magic number that will help the company become profitable by March 2024. And not just that. The cost cutting is also reflecting in appraisals. There were no hikes at Swiggy for the director and

above levels and far fewer promotions. One of the employees that we spoke to on the condition of anonymity told us this. He is a mid-senior-level employee. In his category, the hikes were in single digits at best, which has never happened, not even in the pandemic years. Another area where Swiggy is tidying up before the IPO dinner party is how it is handling attrition. The need for hiring for vacant posts is being scrutinized at a much deeper level. There now needs to be a business critical justification for hiring. For example, the key responsibility areas or KRAs of vacant roles are now classified. under existing roles across the organization, which means increasing deliverables for existing employees.

So now you might want to ask who was the one directing all of this from behind the scenes? Stay tuned to find out. In August 2022, Swiggy hired Rohit Kapoor as the CEO of its food and marketplaces business. He came from Oyo, which is another soft bank backed Unicorn. and he has the reputation of being a tough taskmaster known for his execution style. He has a solid sales background. So in the first eight months of joining, he revamped teams and responsibilities in his division. And most importantly, he was the one who, along with other leadership, carried out the laying off of 6% of Swiggy's workforce, which was around 400 employees.

and as rough as it may sound, this is actually what played a significant role in making Swiggy's food delivery business achieve profitability. And then Swiggy took things up a notch. In April this year, Swiggy, which handles over one and a half million orders per day, introduced a platform fee of two rupees for customers. And then it increased it by another rupee. So basically, three rupees in total. Fun fact, also, Zomato started charging a similar fee after Swiggy started doing it. Talking about Zomato, there is one thing that Swiggy should have learned from it way before, but thankfully, finally, it has decided to pick up the ball on it now.

That is its relationship with its restaurant partners. Zomato has always focused on it. One of the Swiggy employees that we spoke to told us, and I'm quoting him, we know from our conversations with Maki brands that they, that is Zomato, for two to three years, had direct conversations or lunches with Zomato CEO Dipinder Goel. End quote. Swiggy, on the other hand, would have their area sales managers do this job. Kapoor wanted this to change for Swiggy. So, one of the employees told us that lately the management has been meeting up with the top restaurant owners and associations in Bangalore.

He said that there is encouragement from the leadership at Swiggy to have more such virtual catch-ups, restaurant visits and participation in distributor forums for partners. Even the sales teams at the company are working more closely with restaurant partners to understand and solve their issues. And this especially important because with the IPO coming and their profitability goal, Swiggy cannot afford promotional spending and they also cannot push costs. on to the customers, especially after introducing the platform fee. Also, before I wrap this up, we need to remember that the food delivery business and even the grocery business is a low margins one. So if they don't solve these issues with their restaurant partners, then ultimately these costs will be passed on to you and I, the customers.

Hello, I just wanted to let you know that there is no daybreak unwind today because we've barely been receiving any recommendations from you guys on WhatsApp and Rahil and I are taking a quick break to figure out how to make the segment much, much, much, much better for you guys. We'll be back soon. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings.

A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. To subscribe, head to the ken.com and click on the red subscribe button on top of the Ken website. Today's episode was hosted by Snigda Sharma and edited by Rajiv Siyah.