Excerpt: The online food delivery decacorn has also become a stakeholder in Kitchens@ following the all-equity deal.
Swiggy has sold its ‘Access Kitchens’ business to Kitchens@ in a share swap deal. The online food delivery decacorn has also joined Kitchens@’s board as a stakeholder following the acquisition.
Swiggy launched Access Kitchens in 2017. Under this vertical, Swiggy allowed restaurant partners to set up kitchen spaces in areas where they did not operate. The objective of the program was to help expand partners’ reach as well as give customers more variety.
Swiggy hopes Kitchens@ can leverage the company’s insights on local demand and choice of partners to diversify food options. Kitchens@ CEO Junaiz Kizhakkayil said in a press release that the acquisition will help expand the company’s reach in four cities across 52 locations and over 700 kitchens.
“Our goal has always been to make fresh food accessible by powering a super-efficient food delivery ecosystem,” Kizhakkayil added.
According to the press release, the current transaction enables a combined annual GMV of $65 million (Rs 520 crore approximately) for Kitchens@, which is also aiming to reach $100 million in revenue within the next six months.
Kitchens@ added it has already secured letters of intent from more than 40 national and international brands to partner with it using a ‘Master Franchise Model’.
Founded in 2018, Bengaluru-based Kitchens@ describes itself as a kitchen aggregator, which provides turnkey solutions to F&B brands to expand their presence with end-to-end services, including infrastructure, technology, and operation services, among others. The company has so far raised $17.5 million in funding.
That said, Swiggy’s latest move comes amid drying up VC funding, especially for later-stage startups. In January this year, Swiggy laid off more than 350 employees in an effort to cut costs. The move affected nearly 3% of its total workforce.
Notably, Swiggy is also preparing to go public soon, Entrackr exclusively reported last month.
“Swiggy has put a plan in place to be ready for IPO by September this year,” said one of the sources, requesting anonymity. “But it would take another 6-8 months to file pre-IPO documents with regulators in India.”
According to sources, Swiggy has a definitive direction from the board to list on the Indian stock exchange after the third quarter of 2024.
Meanwhile, Swiggy, whose scale contracted by 27% in FY21 managed to grow 2.2X to Rs 5,705 crore during FY22. As per Fintrackr’s analysis, its annual losses ballooned over two folds to Rs 3,629 crore during the period.
The EBITDA margin of the company depressed by 918 BPS to -52.88% in FY22. On a unit level, Swiggy spent Rs 1.68 to earn a rupee of operating revenue during the same period. Moreover, its outstanding losses stood at Rs 22,880 crore.
The deal with Kitchens@ is a very interesting move, cut away from the usual jettisoning of stragglers one has come to expect from large unicorns like Swiggy. For one, it seems to be a final throw of the dice to see if a smaller, more focused startup can change the dynamics at Access Kitchens. With an all equity deal and a seat on the board of Kitchen@, it will be no surprise if the big reward for Kitchens@ is a wholesale acquisition by Swiggy, if it demonstrates enough chops to make an impact with the new addition. It’s the kind of deal that the Bengaluru startup ecosystem enables. Now it’s upto the key players to deliver.