Swiggy losses more than double in Fiscal Year FY22

In the online food ordering space, Swiggy may have overtaken in valuations in the last few months, but its problems are still building up. For the fiscal year 2022, Swiggy reported a net loss of Rs. 3,629 crore, more than double the loss of Rs. 1,617 crore reported in FY21. Clearly, Swiggy has been trying hard to buy higher sales by spending heavily on marketing. That has helped to boost the top line but it has come at the cost of sharply higher losses. Clearly, the losses were a result of the efforts made by Swiggy to boost gross revenues, which did rise by over 120% from Rs. 2,547 crore to Rs. 5,705 crore in the fiscal year FY22. The top line growth has surely come, but it has come at a fairly steep cost.

It is not just about the top line and the bottom line. One of the things most of the digital players are trying to achieve is reduction in cash burn. Swiggy has not been too successful in that endeavour. For instance, the cash outflows from operations for the fiscal year FY22 stood at Rs. 3,900 crore as per the annual statement filed with the Registrar of Companies (ROC). Zomato was better off in comparison. IT reported operating revenues of Rs. 4,192 crore in FY22, but losses were relatively muted at Rs. 1,203 crore. In fact, some of the analysts are now veering around to the view that in a turn of events, Zomato may be gradually gaining an edge over Swiggy in the food delivery business.

For Swiggy, the heavy investments are not only in its food delivery business but also in its quick commerce business which runs under the Insta Mart brand name. Today, the Insta Mart business accounts for nearly 35% of the revenues of Swiggy on an annualized basis. While Zomato does not have its in-house quick commerce business, it had recently acquired Blinkit, to expand its quick commerce franchise. In the first half of 2022, Swiggy reported food delivery GMV (gross merchandise value) of Rs. 10,500 crore, smaller than the GMV of Zomato at Rs. 13,000 crore for the same period. That is where brokerages are now looking at Zomato being oversold and Swiggy being apparently overbought.

The bottom line is that for both Swiggy and for Zomato, the bet on quick commerce appears to be paying off. One thing that Swiggy really needs to worry about is its burgeoning costs. For instance, its overall costs in FY22 more than doubled to Rs. 9,574 crore in FY22, pushing up the cost of procuring products 4-fold to Rs. 2,268 crore. It also spent a whopping Rs. 1,849 crore on advertising and promotional expenses in the year. It spent another Rs. 2,350 crore on outsourcing costs during the year. As stated earlier, Insta Mart now accounts for 35% of Swiggy revenues, so that bet has its heart and head in the right place, without a doubt.

For now it looks like the big area of competition between Swiggy and Zomato will not just be food delivery but also quick commerce. In the quick commerce space, Insta Mart competes with players like Zepto, Dunzo and Zomato’s Blinkit. All these quick commerce players have been doing robust business and that is likely to be arena of conflict. That would only mean that both Zomato and Swiggy must prepare for more losses as they splurge on advertisement, promotion and outsourcing costs in a big way. Most of the digital companies, it appears have mastered the art of building the top line. How, this eventually translates into bottom line, and whether it actually does, remains the real litmus test.