Why Instamart lagged behind peers and more: Q&A with Swiggy CEO Sriharsha Majety

With Swiggy just a few days away from a landmark public listing, the SoftBank-backed foodtech's leadership team is on a roadshow covering 25 cities across the country to woo retail investors.

As a part of the tour, Swiggy's C-suite level executives, including CEO Sriharsha Majety, CFO Rahul Bothra, and CTO Madhusudhan Rao, were in Bengaluru on Monday. They spoke to YourStory about the latest developments across some of its key businesses, including food delivery and quick commerce, and how Majety follows his own version of founder mode when it comes to running Swiggy.

The public listing comes amid relatively bearish sentiment in the market in recent weeks with the BSE Sensex closing at 78,782 on Monday—down from over 85,000 in September.

Swiggy has fixed the price band at Rs 371 - Rs 390 per equity share as it looks to raise Rs 4,499 crore through the fresh issue of shares. The OFS (offer for sale) segment will see existing shareholders, including promoters, tendering around 175 million shares.

It has been trailing behind listed peer Zomato in key metrics in both food delivery and quick commerce business at a time when quick commerce is witnessing aggressive fundraising and fierce competition.

Swiggy expects its quick commerce arm to outpace its core food delivery business. The business has already reached 40% of Swiggy's food delivery business in terms of gross order volumes in four years since its launch.

Edited excerpts from the interview:

YourStory [YS]: Where do you think Swiggy lacked from its listed peers in its quick commerce offerings?

Majety: We assumed that the 30-minute delivery timeline, with little selection, is the version that we thought we could do viably. We achieved the product-market fit and even managed to turn one of our cities profitable. As 10-minute players started coming in next year, it wasn't clear to us how 30 minutes to 10 minutes would work.

Credit to Blinkit for using their experience over the years in the grocery [segment] to put two and two together to demonstrate that this can be done in 10 minutes. I'd be lying if I said we knew it all along and while it may seem obvious, it wasn’t clear that consumers were always going to love 10 minutes versus 30 minutes. 

Also Read

Swiggy plays catch-up with Zomato across key metrics: Report

YS: Are there any plans for extended delivery timelines for some categories?

Majety: Absolutely, not everything can be delivered in 10 minutes. People will have needs for expanded selection and I don’t think you can offer what consumers want in 10 [minutes]. We are already rolling out separate infrastructure for this. 

YS: How can Instamanrt close the gap in its EBITDA margin compared to its listed peer?

Bothra: We are looking to leapfrog in terms of both selection and availability; the gap in the average order value needs to be bridged. Average order value is a direct correlation to the absolute number of categories and SKUs that are available, [which is] especially crucial as we are transitioning from a top-up grocery to a stock-up grocery. There were points in the past when we did not have the entire selection in terms of the larger-sized SKUs as well as some of the non-grocery categories which was later added to the quick commerce basket and has since been corrected over the last six quarters. 

We are looking at SKUs that can be carried on a bike. We don’t think we would do large white good electronics, it will be more kitchen appliances. 

YS: How has the traction been for Bolt? Any challenges and iterations you are currently looking at?

Majety: The response has been phenomenal. Early feedback from high-frequency users on experience metrics is trading even higher, even restaurant partners are very excited. 

It is incredible for some restaurant partners which have an existing supply chain that enables them to hand over in 4-5 minutes. Going ahead, density and selection are going to be key to pulling users, and we are working towards building more on both. 

Also Read

Swiggy launches 10-minute food delivery service

YS: What Standard Operating Procedures do you have in place for returns in contrast to other incumbent players and upcoming peers?

Majety: We do really, really well on refunds and returns. We have a well-oiled process that is built ahead of time in light of expanded selection especially since a refund and return process in a grocery is different from ecommerce. 

YS: Swiggy’s revenue multiple is smaller than Zomato’s. What was the thought process behind that? Do you expect corrections on the fair value once quarterly results are out?

Bothra: We made an institutional effort and met with international and domestic investors. The markets have also been volatile in October and a lot of that has already been factored into the final pricing decision. 

There is a certain story that we're telling about ourselves inclusive of both, the reflection of our past numbers and in terms of strategy going ahead, that are already outlined in the offer documents. Markets will react to operating numbers while taking into account our past trajectory as well as the strategy, so I think there's going to be a fair assessment of our numbers every quarter. 

YS: There has been a lot of discussion about founder mode versus manager mode in startup leadership. What do you think is your leadership style?

Majety: The founder mode is not about breaking hell in every single part of the business without knowing where you can and cannot help. There are many areas of the business, and to say you touch every single thing that touches the company is unreal and that's not going to happen.

Your version of founder mode needs to be in terms of understanding what the biggest and most important things are for the company and also which areas you can genuinely help the business’s trajectory. I think everyone has to choose what their version of founder mode is and we are comfortable with our version of founder mode. 

YS: Instamart was scaled 0-1 by a set of people, while 1-100 is expected to be scaled by a different set of people. Your rivals have not had such transitions. Why?

Majety: In terms of our peers who have a lot more experience in grocery, while we are just 3 years old in grocery and therefore there is a lot of learning for us. Moreover, there are 0-1s happening across newer categories right now, so it is important to get a good balance of category understanding along with experience in scale and intensity within which these categories work.

We absolutely felt it was necessary to bring folks who are very high in intensity, in entrepreneurial zeal and come with experience of scale especially in retail/ecommerce categories.