Daybreak - What Swiggy's IPO prep means for its employees

Episode Date: December 5, 2023

Foodtech giant, Swiggy, wants to raise more than $1 billion through its public offering that is scheduled for mid-2024. For this it is going by its last funding round’s valuation of nearly $ 11 billion. But why now? Because it is watching its biggest rival Zomato’s stock price finally recover this year with back-to-back profitable quarters. Earlier this year, Swiggy CEO announced in a blog post that Swiggy’s food delivery business has finally turned profitable after 9 years of its inception. And by March next year, the company as a whole aims to become profitable. But the company suffered losses with more than $ 500 million in FY 2023.How does it plan to become profitable by March 2024?Tune in to find out.RecommendationDay Zero: ISB welcomed a large batch last year. Now the scramble is on to get them all jobsDaybreak 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.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Preparing a company for an IPO is a bit like getting your house in order

before you throw a dinner party. You need to tidy up, make sure all your dishes are plated well, you get the drift. The idea is to leave your guests impressed. So guess who's prepping to throw the biggest dinner party for an internet company very soon? The food delivery giant Swiggy. The company wants to raise more than $1 billion through its public offering. And for this, it is going by its last funding rounds valuation of nearly $11 billion.

But the question is, why now? because Swiggy saw its biggest rival Zomato stock price finally recover this year with back-to-back profitable quarters. And then earlier this year, Swigy's CEO, Sriharsha Majeti, announced in a blog post that after nine years since it came to be, Swiggy's food delivery business has finally turned profitable. And by March next year, the company as a whole aims to become profitable. But the company suffered losses worth more than $5,000. $500 million in FY 2020.

So how does Swiggy plan to become profitable before it goes public by mid-20204? To begin with, Swiggy employees are working extra hours, even on weekends, and that too with budget restrictions. The company leadership, meanwhile, is meeting up with top restaurant owners. Basically, Swigy is adopting a more hands-on approach with its restaurant partners now. Also, Swiggy has cut its workforce by 6%, which is 400 employees. So, how is all of this affecting the company's employees? Welcome to Daybreak, a business podcast from the Ken.

I'm your host, Snigda Sharma, and I Don't Chase the News Cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Wednesday, the 6th of December. 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 error.

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. From 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 not. now clubbed 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 Markey 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 or. 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. Also, hey, don't go just yet. My colleague Akshya

has come up with Day Zero, the most timely and honestly a brilliant newsletter, focused on B-school placements. The season, as you might know, has already started and from what one of her sources at the Indian Business School or ISB told her, it is a bloodbath. For the entire season, which is 12 weeks from now, she is going to be reporting and writing a week-by-week account of the stakes, the jobs and the salaries, and of course the students who are at the center of it all. 12 weeks, 12 editions. The first one is actually already out. This is a premium newsletter from the Ken and it is only for subscribers, but students and faculties at all colleges across India can unlock it for free using their campus email IDs. I'm going to add the link to day zero to

the show notes of this episode. Do read it and share it with everyone who you think it would interest. Thank you for listening. That's all for today. Catch you on Friday. 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, subscriber-only apps and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague. Rajiv Sien.