Indian Food Delivery Startups Swiggy, Zomato Shed Staff

A little over a month after announcing new funding, Indian food delivery startup Swiggy is laying off 1,100 employees.

Subscribe to the Crunchbase Daily

Swiggy’s Sriharsha Majety wrote in a message to employees on the company’s blog Monday, that the core food delivery business had been “severely impacted” by the COVID-19 pandemic. Majety added that Swiggy would be scaling down or shutting down adjacent businesses that would likely be highly volatile or not relevant in the next 18 months, most notably its cloud kitchen operation.

“While Covid might have long-term tailwinds for the delivery business and digital commerce when things settle eventually, nobody knows how long the uncertainty will last,” Majety wrote. “We therefore need to be prepared to see through this winter, to emerge stronger on the other side. While all our hard work and some good luck has meant that we have had a stable setup all these years, we have to make some very hard decisions today.”

The news of layoffs comes a little more than a month after Swiggy raised $43 million in a new round of funding, bringing its valuation to $3.6 billion, according to TechCrunch. The company also raised $113 million in February.

But the company, like other food delivery companies in India, has been hit hard by COVID-19. Both Ziggy and competitor Zomato saw food delivery orders drop 70 percent in late March and early April, according to the Economic Times.

Swiggy’s best known for its food delivery service, but it also delivers groceries and operates a drop-off and pick-up service for things like laundry and documents. Despite layoffs, the company will be investing in areas that are ripe for growth, according to the blog post.

“While this crisis has impacted our core business negatively, there is no doubt that we are now at an inflection point for the penetration of digital commerce and home delivery in India,” Majety wrote. “This offers us opportunities to continue investing our efforts in grocery and other service offerings that we think will continue to do well. We are going to invest in these high-confidence efforts to focus not on surviving alone, but on growing along the way by adapting very quickly.”

Competitor Zomato is also going through layoffs and cutting about 13 percent of its workforce, or 520 employees, the Economic Times reported over the weekend.

“Our business has been severely affected by the COVID lockdowns,” Zomateo CEO Deepinder Goyal wrote in a note to employees. “A large number of restaurants have already shut down permanently, and we know that this is just the tip of the iceberg. I expect the number of restaurants to shrink by 25-40% over the next 6-12 months. What actually happens, for better or worse, is anybody’s guess.”

In addition to layoffs, all employees at Zomato will be taking temporary pay reductions.

Zomato’s investors include Ant Financial and Sequoia Capital India. Swiggy is backed by investors including Prosus Ventures and Bessemer Venture Partners.

Illustration: Dom Guzman