Quick commerce can become a bigger business than food delivery in India and, unlike food delivery, it won’t be a duopoly, said Swiggy founder Sriharsha Majety. In an interview to Ajay Rag and Digbijay Mishra, he also said that the company’s valuation in the upcoming initial public offering (IPO) is not linked to listed rival Zomato but is instead a reflection of its growth plans. Edited excerpts:
Swiggy’s IPO will be one of the largest public issues this year. How did you arrive at the valuation, which is just a tad higher than in the last round of fundraising?
It came after over 100 meetings with a range of investors, including domestic institutional investors and foreign institutional investors, with feedback collected. The price discovery has happened as a consequence of that.
There’s a natural comparison with listed rival Zomato. How does Swiggy’s valuation align with that given the competition in food and grocery business?
I think our valuation is a function of our business stage today and our plans for the future. That’s kind of how it was arrived at. The valuation isn’t directly benchmarked to others, and it reflects where Swiggy is today and where we plan to go.
Quick commerce has faced global challenges, yet it’s booming in India. What’s the investor sentiment on this?
They understand the maturity the food business has reached and that, of course, is profitable already and continues to improve. If you look at the last few quarters’ trajectory on profitability—that’s there. In quick commerce, even if you look at our filings, there has been growth in overall categories along with profitability also getting demonstrated every passing year. So, really, the excitement at least–-that I could tell from the meetings–-is about how early we are in a very, very large category. That it is working is already clear. It’s at a certain scale today. The economics are starting to get well constructed and I think investors are taking note of that.
Do you see quick commerce potentially outpacing the core food delivery business?
If you look at the overall industry that we’re playing in between grocery retail, etc, it suggests that the headroom for total addressable market (TAM) is larger. The underlying category is larger than the food delivery category. There, it’s a lot more category expansion story because we’re just still super early in the restaurant industry itself overall.
Even in current trends like how the quick commerce industry is growing—faster than food delivery–I can’t predict how soon or in which quarter quick commerce will become larger, but if it is going to be a large category, it could be $30-50 billion in four or five years. And if we are playing a meaningful role in it, I think we will see a point where the quick commerce will be larger than food delivery for us, sure.
Zomato’s performance, intense rivalry, market capitalisation – does that put any pressure on you?
I think we’ve been in competitive categories throughout our life. We were born in the middle of a war in food delivery—World War I. So, I think it’s the same for us. We’ll continue to do what we do. We want to do right by the consumers and I’m not specifically thinking about what the new world is like.
Swiggy has increased the primary IPO allocation. What’s the reason behind this change?
Largely, it is to fund the quick commerce expansion of our dark stores as we see acceleration in industry growth rates. Instamart is now in more cities than our closest competitor. We continue to lead the geographical expansion.
With intense competition in quick commerce, how does Swiggy plan to maintain its market share while ensuring profitability?
If indeed we are playing in the $30-50 billion market over the next four or five years, and market structure is, firstly, a consequence of market size, I think there’s definitely room for three, four players. So, we will see a lot of players come in and it probably won’t be a duopoly like in food delivery. It was a smaller underlying TAM. So, we will see multiple players over there, and I think that’s not going to go away anytime soon.
So, what’s your strategy then?
I think the category front lines are changing every day, like in terms of how many categories each of the players is in and how many cities each of the players is in. I think the battle will come down to serving the consumer the best and that comes from both assortment as well as convenience over the next few years. Who’s offering the most intuitive assortment that the consumer needs is going to be at the centre of it. Category is also going to go through transformation over the next three-four years. The players who are agile and continue to keep moving to serve consumer needs and meet them will have the best chance of protecting the turf.
As a public company, how do you plan to continue to innovate and scale up existing and new businesses?
Even as a private company, during the last three years, we have been growing while improving the profitability continuously for the business. Each of the businesses is in different life stages and across these businesses, it is the same strategy: we are continuing to expect to grow while continuously improving the profitability on each of these segments. So, honestly, I don’t think there is any mindset change because we’re going public.
Outside food and grocery, what’s the next big business for you?
The way we have approached innovation is, firstly, you have to run a pilot to understand consumer interest and then identify the product market fit based around a certain insight and that continues to be the same. I can’t already tell you which new business is going to be the largest because that’s for the consumers. They will give feedback to us. The new business line which we have taken live for a pilot is Rare. It’s a private members’ club, which is very different from what we have done in the past. We’ve been really vertical focused and this is a more horizontal approach, taking aim at a smaller set of users, but still hopefully something meaningful for the users. It still ties in with the core mission of offering unparalleled convenience.
Coming back to the food business, how do you see it growing?
The overall food and restaurant industry, especially the organised part, is continuing to grow around 10-12%. For us, the job is to keep beating and growing much faster than that on the back of a few things there. We continue to acquire a healthy number of new users every year for the category, but I think a lot more can be done in terms of unlocking new consumption, occasions, use cases and affordability.
How do you plan to do that?
New occasions or use cases are, for example, like Bolt, the 10-minute food delivery. We have taken the inspiration from quick commerce and said maybe we should question the previously held thought of food as a 30-minute category. Now, that’s opening up new consumption occasions, for example coffee. You can order before your cab comes and you can plan your life around it. These are some of the examples along with affordability to make sure the long-term growth is there and monthly transacting users can be healthy. Geographically, we already have a very wide footprint. Largely the growth is going to come from the big cities and higher frequencies that come from new use cases and affordability.
