Indian food delivery startup Swiggy is cutting about 1,000 jobs

Swiggy is cutting about 1,000 jobs, most from its cloud kitchen division, as India's top food delivery startup scales back some of its businesses in response to the coronavirus pandemic that has drastically affected millions of firms.

In a statement, the Bangalore-based startup said it was "evaluating various means to stay nimble and focus on growth and profitability across our kitchens."

"This will, unfortunately, have an impact on a certain number of kitchen staff who will be fully supported during this transition," said the startup, which, according to an analysis on LinkedIn, employs about 12,000 people.

Swiggy did not reveal the number of people it was letting go, but a source familiar with the matter told TechCrunch that about 1,000 jobs were being cut. Indian news outlet Entrackr first reported the layoffs.

As the firm cuts its headcount, it is also looking to reduce its monthly burn rate to about $5 million, down from about $20 million it spends in winning customers currently, the source said, requesting anonymity as some of these matters remain private.

Swiggy - which has raised $1.42 billion to date, including $156 million as part of an ongoing Series I round this year - competes with Ant Financial-backed Zomato, which is also in talks to raise about $500 million by mid-May, Deepinder Goyal, the co-founder and chief executive of the Gurgaon-based startup, told TechCrunch last week.

Both the startups spend nearly the same amount of money in discounts and other incentives to sustain their customers and win new patrons. India's food delivery market, valued at $4 billion (by research firm RedSeer), has become a duopoly as FoodPanda, owned by Ola, made a major strategic shift in recent years and Uber sold its Indian Uber Eats business to Zomato.

Swiggy and Zomato have, however, struggled to cut costs in fear that they might lose customers. And those fears are well founded.

Anand Lunia, a VC at India Quotient, said that the food delivery firms have little choice but to keep subsidizing the cost of food items on their platform, as otherwise most of their customers can't afford them.

The lockdown that New Delhi ordered last month has created new challenges for both Swiggy and Zomato. Both the startups are now seeing fewer than a million orders placed on their platforms, down from nearly 3 million they were handling before the outbreak.

In the last year, both the startups have attempted to expand into new categories in search of additional revenue sources. Swiggy has expanded and doubled down on cloud kitchens, which allows its restaurant partners to launch in more locations with not as much investment.

Late last year, Swiggy executives said they had established 1,000 cloud kitchens for its restaurant partners in the country - more than any of its local rivals. The startup said it had invested in more than a million square feet of real estate space across 14 cities in the country in the last two years.

In the wake of pandemic, both Swiggy and Zomato have also started delivering grocery items to customers.