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Swiggy Confirms Rapido Stake Re-Evaluation Amid Intensifying Competition

This decision comes as Swiggy navigates a period of increased marketing investments and a focus on profitability across its core segments.

Swiggy
This decision comes as Swiggy navigates a period of increased marketing investments and a focus on profitability across its core segments (Photo: Vijay Sartape/NDTV Profit)

Swiggy, the food delivery and quick-commerce platform, has confirmed the intent to re-evaluate its stake in Rapido. The move is driven by Rapido's foray into food delivery.

The decision comes as Swiggy navigates a period of increased marketing investments and a focus on profitability across its core segments.

Reconsidering Rapido Investment

Rahul Bothra, chief financial officer of Swiggy, confirmed the company's intent to re-evaluate its stake in Rapido in an exclusive conversation with NDTV Profit on Friday.

"Our investment was more strategic in nature, we wanted to see if we can get certain benefits on the delivery side. We did a few experiments but it was not working in the synergy we were expecting it to," Bothra said. He added that Swiggy is seeing a lot of interest in the purchase of their stake and a decision will be made soon.

This reconsideration comes after Rapido's direct entry into the food delivery space, creating a potential conflict of interest for Swiggy.

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Business Outlook And Q1 Performance

Swiggy's first-quarter results show a mixed but largely positive picture. The company reported a 13% sequential rise in consolidated revenue, reaching Rs 4,961 crore in the quarter ended June, surpassing analyst estimates. However, losses also widened sequentially to Rs 1,197 crore, compared to Rs 1,081 crore in the preceding quarter. Despite this, operating loss or Ebitda narrowed to Rs 954 crore. Analysts remain largely optimistic, with six out of eight tracked by Bloomberg recommending a 'buy'.

Bothra addressed the widened losses, attributing them to "marketing investments in new growth cities." He noted that he is confident in the quick commerce segment, stating that margins are expected to be positive over the next two to four quarters. For the food segment, Ebitda profitability is projected in the medium term, with flexibility for further marketing investments. Bothra also hinted at increased spending for consumer acquisition amidst intensifying competition.

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Building Better Models

Rohit Kapoor, chief executive officer of Swiggy Food Marketplace, provided insights into "Bolt," their 10-minute delivery service. He noted collaborations with restaurant partners to optimise preparation time and fine-tune Swiggy's own delivery model, noting confidence in upscaling the offering.

"The economics are also fair good because the delivery costs are slightly lower," Kapoor noted, affirming continued belief in the 10-minute delivery model, as the management is expecting Bolt to grow in line with the platform.

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