Food tech giant Swiggy is making the biggest leap in its business since its inception in July 2014. The company is seeking an initial public offering (IPO) in exchange for only running those companies that make a profit. according to a report published by ET Prime. As such, the company plans to scrap its vertical kitchen infrastructure — Swiggy Access.
The company launched about five years ago as a Kitchen-as-a-Service offering to help restaurants run their cloud kitchens. However, Swiggy has failed to make significant profits from this venture.
Sources told ET that infrastructure costs were too high to sustain the business. “The biggest problems for restaurants are real estate and labour. That’s exactly what it wanted to solve. The problem was the long time to maturity like most infrastructure-intensive companies,” one of the sources said.
Read | Swiggy appoints 3 independent directors to its board
Swiggy is now selling its cloud kitchen services business to a company called Kitchens@, ET Prime revealed. However, neither company has officially released a statement on the matter.
Swiggy Access had around 200 locations in Delhi, Hyderabad, Mumbai, Bengaluru and Chennai but the number has been reduced to around 30-35. Kitchen@’s acquisition of Swiggy Access will likely come as part of a stock swap deal, the report said. While Swiggy Access was valued at US$10 million (Rs.82.77 billion), Kitchen@ is valued at around US$40 million (Rs.3.31 billion).
In contrast to Swiggy, Kitchen@’s core business is its cloud kitchens. Its official website suggests that it has provided services to national chains such as Mainland China, Keventers, Chaayos, and others.
Notably, Zomato, Swiggy’s main competitor in the grocery delivery business, was also an investor in Loyalty Hospitality, Kitchen@’s parent company, until 2020. Zomato invested in the company after it closed its own kitchen infrastructure business, Zomato Infrastructure Services, in 2018.
Similar to Zomato, Swiggy is trying to sell its kitchen service business ahead of its IPO. According to Enttrack, the company aims to go public by September 2023.
In Delhi-NCR, the company has shut down its cloud kitchen business, The Bowl Company, after trying to operate it in various ways. However, the same brand is doing well in cities in South India along with Soul Rasa.
Swiggy is currently focusing its efforts on Instamart, on which it has burned around US$30 million (Rs. 248.31 billion) every month since December 2022. The company plans to publish a number of FMCG brands on Instamart.
Swiggy raised around US$700 million (Rs.5,794.56 crore) from investors in January 2022, bringing the overall valuation to US$10.7 billion (Rs.88,577.86 crore). Zomato’s market cap is reportedly half that of Swiggy’s, and if the latter wants to sell high-priced shares to investors, it has to prove its businesses are profitable or at a significant amount
Comments are closed.