'Our Instamart business is growing rapidly': Swiggy CEO Sriharsha Majety

Swiggy IPO: For a brand as visible as Swiggy is, its top management is very low-profile. The unicorn’s IPO is scheduled to open on November 6. It is already a name in the food delivery and quick commerce businesses.

Sriharsha Majety, 38, its Group CEO and co-founder, Swiggy, spoke to Business Today on issues ranging from the business model, the big opportunities in India and more importantly, the path to profitability. 

Edited excerpts from an interaction with Sourav Majumdar, Palak Agarwal and Krishna Gopalan:

How did you hit upon Swiggy as a name? What was the initial phase of setting up the business like?

It was over two good beers at Arbor Brewing (a craft brewery in Bengaluru)! Nandan (Nandan Reddy, Swiggy’s Co-founder) and I came up with a simple piece of logic that it had to be short and catchy. We were really throwing darts with names and Swiggy came up. I think it’s a fun name and has worked.

On Day One, there were zero orders. The first one came the following day. I had a friend in Flipkart and asked him to spread the word within the company. Suddenly, we had around 30 people looking at it and eventually, there were two to three orders. Initially, we anticipated demand only over the weekend but now people were using it as something that was convenient. In the US or the UK, you just step out and grab a salad, sushi. In India, with delivery, we saw more repeat orders and that was a revelation. In terms of frequency, it was a case of people using it as often as what they do with a toothbrush.

One must remember there were no apps then. Our technology was rudimentary but functional. The delivery partners had to give a missed call on one of four numbers and each had a certain task. Then, a text message went to the consumer and that was a big delight for them since they had never seen anything like that before.

Did you spend a lot of time doing the math on the business?

Luckily, we did not! We just felt the idea would work. Food delivery had better gross margins compared to logistics (an earlier business foray) at just 5 per cent. Globally, the model is to just pass on the order but this version too was profitable. We were also a late entrant — Tasty Khana, Food Panda, Tiny Owl were all there, plus Zomato came before us. We took the decision after deciding that there was no joy in building a marketplace, though it is hugely profitable. It was the early days of the gig economy and it started to build out from there.

We now have 400,000 delivery partners and one of the big joys is just the canvas. India has made remarkable progress on digital and that is a factor that makes it incredibly exciting. Then, there is the part on generating jobs or just growth for restaurant partners.

Today, owning the consumer is a big story. How do you see that opportunity given where your businesses are placed?

It is important for a business plan to be flexible and robust. The fact is things are generally very hard to predict. Food delivery is maturing but in quick commerce, anything can happen. Here, the potential market opportunity is determined, among other things, by one’s right to win, unlocking the consumer opportunity and what categories lend themselves to quick commerce.

Just looking at the current moment convinces me that this is India’s decade. In the US, restaurant sales surpassed that of grocery in 2015. In India, we believe grocery will be 25X of the restaurant industry. We love that increase in discretionary spending. Then, you need to look at how Indian cities are being built with ultra-large tech parks, leading to a surge in discretionary spending and more instances of eating out. Quick commerce and dining out will see more consumers coming in. Over the next three years, of the 10 things we do, if we do that one thing that can capture imagination at scale, it can lead to something big. Instamart will see higher growth rates than what we see in food delivery simply because of the headroom.

Swiggy is still in the red. What is the path to profitability?

Our food delivery turned profitable at an Ebitda level for FY23. Instamart is on a path where both growth and profitability are both important and I feel good about the path. We need to look at the exciting opportunity and continuously invest in them. Plus, there is the need to go with category ebbs and flows. For instance, food delivery in the early years was different since penetration levels were low. Look at Instamart today—it is growing like a weed.

There have been reports on a potential deal for Amazon to pick up a stake in Instamart. What is the status of that and is there a chance of Swiggy itself being acquired?

Conversations are always going on but we have nothing meaningful to share. I want to make it clear that there is no question of Swiggy being sold. We are just having too much fun! You need to look at, for instance, the overall restaurant business in India. It is $60-65 billion of which 40 per cent is organised. This part will grow in teens for a long time and food delivery will grow faster.  

How much will the listing of Swiggy change life for you especially when it comes to doing business by gut and instinct?

We are in the midst of a dynamic landscape and instinct is important. I will say we are excited to build on these strengths and passionately explore ideas.

(This interview was conducted before Swiggy's IPO details were made public)