Swiggy has also set the price band for the IPO, which is going to open on November 6.
Why did you increase the size of the offering?
Rahul Bothra: One of the reasons we have increased the overall size of the offering is to invest behind the quick commerce business. We have seen higher accelerated growth in the industry itself and that to prepare for larger expansion of our dark stores, one of the reasons that we have increased our primary offering.As of September, Blinkit has around 700 dark stores, you have 537-540. How much do you want to increase it further one or two years down the line?
Sriharsha Majety: We are definitely expanding our dark store count also rapidly to keep in line with the growth ambition that we have. Even in the first quarter results that we published, there has been some strong growth in the category and we continue to go after strong growth. But I think the store count is going to be a consequence of the growth ambition which continues to be aggressive. But at the same time, there is only a three-month window between deciding to open a dark store and actually opening it. The key here is to be agile and keep watching the market and constantly iterate on the footprint.
When you take a look at your closest competitor, they have recently done a lot of diversification in their own business. Does Swiggy have any plans like that going forward? Do you want to incorporate a completely new segment that focuses out of quick commerce and food delivery or are these going to be your key focus areas going ahead?
Sriharsha Majety: Our mission statement is all about unparalleled convenience for the urban consumers. Today, we have our three core categories between food delivery and quick commerce and let us say out of home consumption. Outside of these, we are constantly always piloting new initiatives that can be businesses in the future.
If you look at the entire history of Swiggy, we have been constantly piloting many things and that continues to be the case even now. Even as we speak, we have pilots going on for new business lines. One that got some recent coverage was Rare, a private members club built for a slightly smaller audience rather than Swiggy’s mass premium audience. It can be very meaningful in the future. We will find out only when the consumer response is collected at scale.Do you have any targets for your GOV and take the rate post the IPO. How would this IPO change both these metrics going ahead?
Rahul Bothra: The IPO itself will not change the economics of the business. The economics of the business has been on a trajectory which is growing. Our food delivery business got a 6.4% contribution margin and a 0.8% positive EBITDA in Q1 in the declared results and it is a combination of both our take rate expanding.
It has been very successful in monetising through the advertising opportunity on the platform with a win-win outcome for both for our restaurant partners as well as the consumers who get access to a more number of restaurants and for the restaurants, they get a better funnel.
I will take you back to the part of valuations once again. The timing, of course, is in your hand. Market forces act independently out of your control, but your competitor has just raised money. Has it been one of the reasons for the pricing part, which has been done right now? Was it a consideration or just the market forces which were happening?
Sriharsha Majety: Even more importantly, maybe closer to our heart, is this journey to build a public company. It began two years back with an independent board of directors coming up and it is all about feeling ready for your next phase of life as a public company and that is the most important thing. You can time any market you want, but you need to be prepared for a version of what you think is ready. We are ready for the responsibility of getting a lot more stakeholders and doing right by them.
From your RHP, I understand that you have increased the allocation towards quick commerce than you had planned earlier. A lot of players that were earlier into online grocery or online commerce have also now started shifting towards quick commerce. What is the strategy going ahead? Does it get any better for quick commerce from here?
Sriharsha Majety: I think 10-minute is not a novelty anymore. It was a couple of years back, but consumers treat it as the new normal. What they do not treat as the new normal is still the selection that is on offer for consumers on platforms and that is where we are constantly seeing the envelope being pushed on what you can get on quick commerce. The last launch that has been covered was a pharmacy launch done in partnership with PharmEasy. Now, that is an example of a category that did not exist three months back, but today has a chance of existing. Is all of that possible to be fulfilled? That is the journey ahead of us. Our job is to innovate and find new categories that consumers want while figuring out how to do it sustainably.
What is the path to profitability? Your company has shown improved performance as per RHP, the financials which has been mentioned, the losses have narrowed, revenues have increased, but it has been in losses since inception. So, when are you coming to profit?
Rahul Bothra: Again, it is a sum of parts. If you look at the food delivery business, which is the more mature business, we are already profitable, that business is generating cash. It is growing at a healthy clip and is expected to continue to be on that trajectory of getting to steady state EBITDA.
The quick commerce business has been calibrating both on growth and profitability. Our contribution margin profile narrowed down from a loss of 23% in FY23 to 6% in FY24, down to 3% in the quarter one of FY25. As the overall business has expanded, our throughput per store has increased, the monetisation levers have kicked in, the costs levers are now already looking where steady state should be. All these factors have meant that the business is towards a sustainable economics trajectory.
Would you say that the rate of cash burn that initially goes into any company when they are growing and expanding, is starting to come down now?
Rahul Bothra: I think we have seen that. For example, a food delivery business took X years to get to profitability, but we have seen the newer businesses generate profitability significantly ahead of that. So, it is a factor of both the size of the opportunity, as well as the economics to get to parity and we have seen that trajectory across the industry.
Let us talk in cricketing terms. Which are the categories where you see the highest, T20 kind of growth and which are the sectors with stable growth like test cricket?
Sriharsha Majety: No, T20 or ODI, maybe there are no test cricket categories that we are operating in right now.
Let us say who is your Suryakumar Yadav and who is your Ajinkya Rahane?
Sriharsha Majety: I do not know. I look at all of them. Each of them has a very different trajectory. Like I will tell you, even the food delivery business, which today is growing slower than let us say a quick commerce category, but it has like a couple of decades of growth ahead of it. And I will tell you why. I think the underlying reason for either the food delivery business or the out of home is the restaurant industry and the restaurant industry is at an incredibly early stage in India.
A country like China vis-a-vis a country like India, maybe has 30x the number of restaurants in India for a similar population. So, as our GDP per capita expands, we should expect the restaurant industry to keep growing. It is already growing at a very healthy clip of 10% plus, the organised restaurant industry, and it is not going anywhere. Our job is to build on top of these beautiful rails and keep doing what we can to increase consumption through innovation, affordability, all of these things.
In the past, you have acquired Scootsy and that has worked out for you. Dineout has been a very good acquisition for you. Are you going to be on the lookout for more acquisitions after the IPO? Is that on the cards?
Sriharsha Majety: We have a history of building home-grown organically, but it is not because of some dogma about we will only do this or that because if you are the one innovating and pioneering the first version of the category, who are you going to acquire? But at the same time, in the case of Dineout, we saw a great time to market advantage because we felt the offering should exist and there was a company that we liked and we leaned forward and acquired it. It is really hard to predict ahead of time what you are going to acquire. Everything is situational based on the excitement about the markets and companies that can help us get ahead.
But would you be open to?
Sriharsha Majety: We have demonstrated openness to. We will continue to be open to it.
Which are the top three reasons to invest in Swiggy?
Sriharsha Majety: The first reason is to just look at it as a barometer of India’s consumption story. If you look at the next one-two decades, we operate in a very exciting part of India’s demographic pyramid. We are offering like the top X percentage consumers of India who are broadening their wallet share with the platform. It is just a consumption story, a macro story.
I think the number one is we should be excited by Swiggy’s track record of being able to pioneer and innovate and get into blue ocean categories like we have in the past and we hope to continue doing that over the next one-two decades as well.