A decade ago, ordering a bite of blueberry cheesecake at work or a hearty biryani meal for lunch meant fighting traffic, waiting in long queues at restaurants and cafes, and finally reaching home to get your order. This arduous process of getting food was not just time-consuming but also demotivating. Today, the situation is much different. Thanks to the arrival of online food delivery platforms like Zomato, Swiggy, and others, people can now order their favorite dishes from the comfort of their homes.
The Indian food techs have become a lifeline for the busy urban population, giving rise to a new generation of foodies. The market for these platforms has grown by leaps and bounds in the past few years as more people are willing to pay for a convenient delivery experience. However, the business model of these companies has its share of challenges. The most critical among these is reducing the cash burn to achieve profitability. This has been one of the main concerns for investors.
While the two food tech giants have reported a surge in their revenues, they have been unable to reduce their losses. This has been due to the heavy investments in marketing and expansion. In addition, they have to bear the cost of the ever-increasing competition in the food-delivery market.
This has pushed their operating expenses to shoot up. Zomato and Swiggy have been laying off employees to cut down on costs. In the third quarter of 2023, the two food-delivery firms recorded an operational profit of $700 million but incurred a loss of $1.1 billion.
Food delivery companies are also plagued by controversies and lawsuits from customers, workers, and restaurant owners. Swiggy’s controversies have revolved around religious politics, and the company has been accused of using its platform to create an unnecessary divide in society. In one such case, a customer refused to accept his order because the delivery guy was Muslim.
A few former and current employees have alleged that the company pays money to buy positive reviews and bury negative ones on its app. These allegations have tarnished the reputation of the company.
Despite these hurdles, the company is planning an IPO shortly. Investors can consider buying shares in the upcoming IPO of Swiggy and other food-delivery startups to generate returns on their investments. The IPO will likely be priced at $13-15 per share and open for subscription from July 21-23. After allotment, the shares will be credited to your demat account, and you can trade them on the stock exchanges.