Food tech giant Swiggy is taking the biggest leap in its business since it was first launched in July 2014. The company is going for an initial public offering (IPO), and for that, it wants to only keep operational the businesses that yield profits, according to a report published by ET Prime. Thus, the company is planning to do away with its kitchen infrastructure vertical — Swiggy Access.
The business was opened around five years ago as a kitchen-as-a-service offering to help restaurants run their cloud kitchens. However, Swiggy has not managed to yield substantial profits from this venture.
Sources told ET that the costs of infrastructure were too high to sustain the business. “The biggest problems for restaurants are real estate and labour. That’s exactly what it was trying to solve. The trouble was its long gestation period as with most infrastructure-heavy businesses,” one of the sources said.
Swiggy is now selling off its cloud-kitchen service business to a company called Kitchens@, ET Prime revealed. However, neither company has officially released any statement regarding the same.
Swiggy Access had around 200 locations operational across Delhi, Hyderabad, Mumbai, Bengaluru, and Chennai, but the same was reduced to around 30-35. The acquisition of Swiggy Access by Kitchen@ is likely to happen in a share-swap deal, the report said. While Swiggy Access has been valued at $10 million (Rs 82.77 crore), Kitchen@’s valuation is at around $40 million (Rs 331 crore).
Kitchen@’s core business, unlike Swiggy, is its cloud kitchens. Its official website suggests that it has provided services for national chains like Mainland China, Keventers, Chaayos, and others.
Notably, Zomato, Swiggy’s chief rival in the food delivery business, was also an investor in Kitchen@’s parent company, Loyalty Hospitality until 2020. Zomato invested in the company after shutting down its own kitchen infrastructure business, Zomato Infrastructure Services, in 2018.
In a similar vein to Zomato, Swiggy is also trying to offload its kitchen services business ahead of its IPO. The company wants to go public by September 2023, according to Entrack.
In Delhi-NCR, the company has shut down its cloud kitchen business, The Bowl Company, after trying to run it in a number of different ways. However, the same brand, along with Soul Rasa, are doing well in cities in southern India.
Swiggy is currently focussing its efforts on Instamart, on which it has been burning around $30 million (Rs 248.31 crore) every month since December 2022. The company is planning to release a number of FMCG brands on Instamart.
Swiggy raised around $700 million (Rs 5,794.56 crore) from investors in January 2022, which took its total valuation to $10.7 billion (Rs 88, 577.86 crore). Zomato’s market capitalisation is reportedly half of that of Swiggy’s, and if the latter wants to pitch high-priced shares to investors, it has to show its business verticals as profitable or with a considerable