Swiggy

Chasing scale, Swiggy’s net losses rise 500% to Rs 2345 Cr

Swiggy

After e-commerce and payments, food delivery has become a bruising game of deep pockets in India. All top tier investors –  Alibaba Group, Naspers, Tencent, SoftBank (indirect bet via Ola) and DST – have placed their bets in food and logistics plus tech, aka foodtech. 

And since much of the money in the foodtech space has flown to Swiggy and Zomato, the duo didn’t bring much joy as they bled profusely in FY19. According to previous reports, Zomato had revenues of Rs 1,421 crore with a loss of about Rs 2,000 crore.

Its rival Swiggy has just filed its annual financial report for the period ending March 2019, earned 72% of the total operating revenue income by providing marketplaces and food services. Remaining 18% and 10% of income came through delivery and offering ancillary services respectively.

Diving deeper into revenue numbers of the Naspers-backed venture, the biggest contributor was earnings from marketplace services that stood at Rs 805.7 crore. Income from promotions and delivery income followed at Rs 385 crore and Rs 197.3 crore respectively.

Sales of its cloud kitchen segment through private labels such as Homely, The Bowl Company, et al brought another Rs 67.5 crore while other related services added Rs 12.7 crore toward its operating revenue. 

In total, Swiggy recorded a 2.7X jump in operating revenue to Rs 1,121 crore in FY19 from Rs 417 crore in FY18.

Bangalore-headquartered Swiggy’s earnings from interest on deposits and mutual fund gains shot up 4.3X from Rs 39.5 crore in FY18 to Rs 170 crore. But the picture isn’t all rosy: Swiggy lost around Rs 60 crore to the IL&FS crisis that shook the markets in September last year. IL&FS was India’s leading infrastructure finance company until it ran out of money and defaulted on its lender payments. 

Nevertheless, the company’s treasury department remained optimistic and purchased financial investments worth Rs 12,767 crore during FY19. At the end of the last fiscal, Swiggy held 91% of its total assets in current financial assets worth around Rs 5,824 crore.

During FY19, the company raised Rs 7,072 crore through issue of shares as the hunger for growth of scale became paramount. Following suit, Swiggy’s total expenses shot up 4.3X to Rs 3,637.6 crore in FY19 from Rs 841.2 crore in FY18 and the soaring cash burn was reflected throughout their expense sheet. 

Expenditure on employee benefits almost tripled to Rs 537.2 crore in FY19 from Rs 186.4 crore in FY18 as the company bolstered its workforce to chase scale. Key managerial personnel also saw their remunerations rise 3.2X to Rs 13.4 crore in FY19 from Rs 4.2 crore Swiggy collectively paid to its leadership team during FY19. COO Vivek Sundar had a remuneration package of Rs 4.9 crore and was the highest-paid executive. 

As the company pushed its own private labels, purchase of raw material for cloud kitchens grew 7.5X to Rs 41 crore in FY19 from Rs 5.5 crore in FY18. Further, finance costs and depreciation added Rs 20.2 crore to expenses.

The biggest expenses item at Rs 3,043 crore listed as “Other expenses” grew almost five-fold in FY19 from Rs 636 cr in FY18. These other expenses can broadly be divided into operating expenses (55%) of Rs 1,671.5 crore and non-operating expenses (45%) of Rs 1,371.5 crore.

These expenses incurred during FY19 included delivery costs of Rs 158.5 crore, payment gateway charges of Rs 41 crore and expenses on consumables at Rs 46 crores. 

Expenditure on advertising & promotions took a 6X leap to Rs 776.2 crore in FY19 from Rs 130 crore in FY18 while IT expenses also grew 4.6X to Rs 206 crore from Rs 44.5 crore in FY18. Importantly, losses on order cancellations added up another Rs 113.3 crore to the expenses along with the aforementioned loss of Rs 60 crore on IL&FS securities.

The increased spending was clearly indicated in the Net Operating Cash Outflows which ballooned 6.5X to nearly Rs 2,328 crore in FY19 from Rs 357.2 crore in FY19. Taken together, Swiggy’s total losses also ballooned  6.1X from Rs 385 crore in FY18 to a mammoth Rs 2,345.6 crore in FY19.

Unit economics also disrupted to the increased spending in FY19, growing by 62% to Rs 3.24 in contrast of Rs 2.01 spent to earn a rupee of revenue in FY18.

Swiggy claims to have a dominant position in the foodtech space with a 4.2X jump in order volumes and a 2.7X increase in operating revenue. While the company has grown at a high pace during FY19, its mounting losses indicate that scale has come at a high cost.

In August last year, Swiggy acquired a 100% stake in Mumbai based on-demand delivery startup Scootsy and had invested nearly Rs 70 crore in the company. The influx of capital helped the Mumbai based subsidiary grow but it ended up posting a loss of Rs 207 crore.

Similarly, earlier this year it also invested Rs 31.2 crore in packaged food startup Fingerlix.com,which lost another Rs 273 crore during the last fiscal and pushed consolidated losses for the company to Rs 2363.6 crores in total.

The wide gap between the growth of revenue and expenses is, of course, a concern for the Sriharsha Majety-led venture. The financial health of the foodtech major is unlikely to show much improvement in the ongoing fiscal as it’s locked in a fierce battle with Zomato and UberEats.

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Swiggy

Chasing scale, Swiggy’s net losses rise 500% to Rs 2345 Cr

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