With competition in the quick commerce market intensifying amid aggressive expansion by Amazon and Flipkart, and Zepto eyeing an IPO, Swiggy group CEO Sriharsha Majety said the market is unlikely to sustain the number of players operating today.
In an interview with ET, Majety said Swiggy is prioritising economics and long-term staying power over reacting to short-term market-share battles, warning that unchecked negative unit economics can become damaging when growth slows.
Majety’s comments come days after shareholders voted down Swiggy’s proposal to amend board appointment rights, a move he said was tied to the company’s longer-term push to qualify as an Indian Owned and Controlled Company (IOCC). Majety said Swiggy remains confident of securing approval when the proposal is presented again and dismissed speculation about the company being an acquisition target. Edited excerpts:
You’ve been in the news for failing to secure shareholder approval to amend rights to appoint directors. Can you take us through what that means for the company?
For us, the amendment was one important step towards eventually getting IOCC status, and you know the benefits we’ve talked about. If we become an IOCC, it offers a lot of operational simplicity, as well as some additional margins for us. So, it’s definitely a long-term priority for the company.
Obviously, this amendment by itself was not sufficient. We need domestic ownership to be above a certain level, and our domestic ownership crossed 48% as of last week. There are three or four things that still need to materialise, and the amendment we requested was one of the steps needed for eventual IOCC status.
We received healthy engagement from a large part of our shareholder base. We ended up losing it by a narrow margin. We respect the shareholder vote and are already in talks with investors to better communicate what this means and what it doesn’t.
We’re fairly confident about addressing any concerns investors might have, and we’ll work on it and come back soon.
There were concerns that the company’s management was being given greater sway over the board despite their shareholding being small…
On balance, it actually gives more than it takes. As part of the overall amendment, some permanent nomination rights are also being removed, and any additions would be subject to approval by the NRC [nomination and remuneration committee], the board, and shareholders. So, we don’t see this as a governance issue at all.
We could have handled this better through engagement. Since the vote, we’ve been in touch with shareholders, and we already feel they have a much better understanding of the rationale. That’s why we feel very confident about this going through when we come back the next time.
When would that be?
We can’t offer very specific timelines, but it will be soon.
What went wrong with the shareholders… Are there any concerns they’ve flagged?
Our engagement with investors has been very strong. We did an IPO in 2024 and a QIP six months ago. Our CFO, I, and the broader leadership team have met investors multiple times.
As for investor concerns, the primary focus is how we balance growth and profitability for Instamart. That is the main discussion point, and there’s really no other issue that comes anywhere in the same zip code in terms of investor attention.
Our investors are satisfied with our contribution margin (CM) journey so far, and we’ve also spoken about our ambition to reach Rs 1 lakh crore in net order value. Naturally, investors will want to see a stronger conviction around that ambition.
For us, the task is demonstrating a clear path to that ambition while showing that contribution margins remain strong and growth continues to come through. That’s when you can build a much stronger bridge towards that goal.
Until then, given the competitive nature of the market, many people will want more clarity before they are fully convinced. That’s the challenge cut out for us.
There’s been chatter about Swiggy being an M&A target. What’s your take on that?
I find it rather amusing. We have three businesses, two of which are already profitable or on the path to profitability and accelerating. Following the QIP, we have over Rs 15,000 crore in the bank. Instamart has moved faster towards contribution-margin positivity than anyone else in the category over the last five quarters, though we still have a few things to solve. As a business, I think we can do even better, but I can’t imagine where this imagery even comes from.
I understand that proof points around Instamart need to become stronger. Outside of that, we do keep wondering how some of these perceptions make sense.
Internally, we remain optimistic and confident that on the Instamart side, we will outlast any short-term price wars and are confident about our staying power.
Our food delivery business has also posted its fastest growth in the last 15 quarters. Our innovation arm is firing on all cylinders in an unprecedented way.
We feel optimistic, but that doesn’t mean everything is solved. Quick commerce is at an important juncture, and our task is to demonstrate what we can achieve with the business.
So you’re saying shareholders have confidence in the management at this point?
Ultimately, confidence in management exists in shades of grey. Obviously, the message right now is that investors need greater confidence that Instamart will emerge as a very strong and enduring outcome, and that is reflected in the stock price.
Our investors have made it abundantly clear that there are questions around whether this will emerge as a super-strong outcome, and for the right reasons.
But beyond that, I have neither received that kind of feedback nor do I understand it, given the strength of everything else in the business.
The entire quick commerce sector has been built on growth. There is a lot of criticism about you being too inclined towards profitability… Where are you on that?
If you go unchecked on economics for too long and then have to course-correct after market growth slows dramatically, the music can stop very abruptly.
For us, it was a deliberate decision to assess what category growth could look like over the next three years and determine how long we could sustain elevated levels of negative unit economics. Given that the category growth over the last four to five quarters has been strong overall, we felt this was the right time to act, especially with newer entrants coming in, because last year’s growth is not guaranteed this year, and this year’s growth is not guaranteed next year.
I think every peer, except those who have already figured out the economics, will at some point have to take stock of the situation and make their own choices. We’ve made ours.
Given that we’re probably the first player after Blinkit to take this route, some may see it as vacating the market. In fact, we see it as the opposite. If you don’t consolidate at the right time, it can become seriously damaging later.
This is a commoditised market. Left to itself, you either end up pursuing a price-led strategy or an assortment-led strategy. We believe a price-led approach is not for us.
We’re not fighting for absolute short-term relevance. When there are seven players in the market, there’s greater clarity. We feel we have that clarity now.
Zepto is also looking to go public. How does another listed company in a space that’s losing money stack up? And now Flipkart and Amazon are getting aggressive in the category…
I think the advantage of having seven players in the market is that it forces you to focus much more deliberately on what you can control and what you want to build.
Yes, there’s a new player that will probably list, and there are three or four others that will do what they want to do. We have cash on the balance sheet, the right reset in the business, and a clear idea of how we want to shape it. We believe not shaping the business the way we want would be the biggest risk we face. We’re extremely focused on identifying openings in the market, understanding consumers better, and reflecting those insights in our differentiation strategy. That’s what occupies our thinking. Given the number of players entering the market, this intensity of competition is likely to continue for some time.
Do you think the market can support six to seven players or will there be consolidation?
Market structure is ultimately a consequence of market size. Food delivery, a relatively smaller market, has supported two players and is catching the interest of new entrants. Quick commerce is an $80-100 billion category, so it can definitively support more than two or three players. That said, it is also unlikely to sustain as many players as exist today. The market will likely find a natural equilibrium somewhere in between.
You said earlier you’re not comfortable losing market share but at the same time Amazon and Flipkart are aggressively expanding when you aren’t… How do you reconcile with the fact that this will lead to you ceding market share?
If I get uncomfortable with what’s happening this month and react symmetrically, I’d be equally worried about what that means six to 12 months later. At some level, I’m concerned enough about losing market share 12 months down the line that I can’t make decisions purely in reaction to what’s happening right now.
You talked about having over Rs 15,000 crore on the balance sheet as a strength but it’ll only take you so far until your quick commerce business starts making money…
The losses in quick commerce are coming down every quarter, and overall losses are also reducing, supported by the food delivery business. So, in reality, we don’t need a war chest of this size.
There is a defined path for the company’s capital requirements, but this [the war chest] provides a safety cushion so we can stay focused on what we can control without worrying about other factors.
If anything, our stated trajectory suggests we will need progressively lower investments over time.
Your food delivery business has been growing. Is the growth also happening at an NOV level or is it fuelled by discounts?
Unfortunately, I can’t comment on KPIs (key performance indicators) we haven’t already discussed. But one way to look at it is that both order volumes and MTU (monthly transacting users) growth are increasing, which points to strong underlying user engagement.
If you compare growth today with two years ago, growth is faster now but back then, overall growth was driven more by AOVs (average order value) than order volumes. Today, not only is growth faster, but it is being driven much more by order volumes and less by AOV.
That aligns with our strategy of driving affordability because, otherwise, the user engine doesn’t move and the order engine doesn’t move. We believe that becomes dangerous over the long term.
Is there something to read in the fact that the revival of growth in food delivery has come alongside a new player entering the market, even though Rapido’s Ownly is limited to just Bengaluru for now?
It is a coincidence in timing. But we won’t sit and wait for new disruptors to come into the category. If there’s a genuine opening, we’ll be all over it. We’ll be absolutely insurgent if an insurgent is going to show a new way to grow the market. That’s the game we love the most.
In terms of your diversification play, there have been things that you’ve rolled back… Beyond food and quick commerce, what are the things that are front and centre for Swiggy?
I think diversification would be too aggressive a statement to make. Every year, we launch two or three small, controlled pilots around ideas that could become part of our future, and we’ve also become better at deciding what may not belong.
For example, last year we shut down Pyng and Genie. We also launched a controlled pilot of Snacc in a small set of cities and, after running it for six to nine months, learned what we needed to.
I wouldn’t call this diversification until we find success that justifies scaling and expanding the business.
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