Foodtech unicorn Swiggy has decided to cut at least 380 jobs in a restructuring exercise that was announced in an emergency town hall meeting on Friday morning, said three sources aware of the development.
Swiggy, which offers both food and grocery delivery, has also decided to shut down its meat delivery marketplace as a cost-cutting measure, sources said. They also added that the layoffs have impacted multiple roles across various divisions, including a few employees at the senior management level as well.
In an internal email sent to employees on Friday, Swiggy’s CEO Sriharsha Majety said that the growth rate for food delivery businesses in India and globally has slowed down in comparison to its expected projections which had forced the company to revisit overall costs.
Majety also indicated the company had overhired in the past, which may have pushed the company towards the current retrenchment exercise. FE has reviewed a copy of the email.
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“…We needed to revisit our overall indirect costs to hit our profitability goals. While we’d already initiated actions on other indirect costs like infrastructure, office/facilities, etc, we needed to right-size our overall personnel costs also inline with the projections for the future. Our overhiring is a case of poor judgement, and I should’ve done better here,” Majety said in his email.
Majety also pointed out that in 2021, driven by a surge in demand during the second wave, Swiggy’s food delivery business grew strongly along with an early success with its grocery delivery service Instamart. “With some definite exuberance about the future, we invested into building out our teams to be able to cater to the impending needs of the categories. However, in 2022, two things have happened,” he added.
Majety’s email also said that over the last year, under challenging macroeconomic conditions, many companies around the world have been adjusting to the new normal, with refreshed investment horizons and accelerated timelines for profitability.
“We’re no exception here, and have already advanced our own timelines for profitability on food delivery and Instamart. While our cash reserves allow us to be fundamentally well positioned to weather harsh circumstances, we cannot make this a crutch and must continue identifying efficiencies to secure our long-term,” he said.
In his mail, Majety said impacted employees will have a one-on-one with their managers starting today to let them know they were being sacked. Further, those affected were assured a minimum payout of three months, including variable pay and 100% incentives, along with other financial assistance. However, joining bonus and retention bonus paid out will be waived off, his mail added.
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All affected employees will receive a minimum assured severance of 3 months’ salary and a maximum of 6 months. The annual vesting period has been waived off for these employees, Majety said. “We will be extending vesting to the nearest quarter from the last working date. They will also be eligible to participate in the ESOP liquidity program slated for July 2023,” he added.
Layoffs at Swiggy come just months after its rival Zomato also fired around 3% of its 3,800 workforce in November 2022. Swiggy has also emerged as a tough competition to Zomato as a private company, especially after its $120-million acquisition of restaurant discovery and reservation platform Dineout in May 2022.
In the grocery delivery vertical, Swiggy’s Instamart service had exclusively secured large funding worth $700 million led by investment firm Invesco in January 2022. Following this funding, Zomato also acquired grocery delivery app Blinkit for $570 million, although rumours of the deal had been drifting around since early 2022.
In a recent financial report by Prosus, which is Swiggy’s key investor, the foodtech unicorn was estimated to have hit a gross merchandise value (GMV) of $1.3 billion in its core food delivery business during the first six months of FY23. This was a 40% jump compared to the same period in FY22. During the same period, Instamart also saw its GMV reach $257 million, according to Prosus’ estimates.