Swiggy’s Q3 ad spends rise 47.5% YoY amid ‘irrational competition’; loss widens

New Delhi: Food delivery and quick commerce major Swiggy, which owns Instamart, on Thursday reported a widening of its losses for the third quarter ended December at Rs 1,065 crore, as losses from the quick commerce segment continued and advertising and sales expenditures rose.

The company had reported a loss of Rs 799 crore on a consolidated basis for the corresponding October-December period of the previous financial year.

Flagging "irrational competition," Swiggy co-Founder and Group CEO Sriharsha Majety said its recent investments into lower consumer-side monetisation have not yielded the desired incremental order growth, especially at the bottom of the average order value (AOV) pyramid, and are being reviewed.

"We have consciously chosen not to participate in deep-discount-driven, purely-volume-focused growth that sacrifices AOVs and margins," Majety stated in a letter to shareholders.

Swiggy’s advertising and sales promotion expenses rose to Rs 1,108 crore, up 47.5% YoY, steeply from Rs 751 crore.

Overall, Swiggy's quick commerce business, Instamart, posted a Rs 908 crore loss for the third quarter.

Responding to the debate around gigworker delivery deadlines and earnings potential on hyperlocal platforms, Swiggy stated that the quick-delivery model works by reducing the last-mile distance through the dense and apt placement of stores.

"We don't push delivery partners for timelines, nor penalise them. As our fulfilment-led business takes its point-of-supply closer to the point-of-delivery and customer demand densifies in hyperlocal zones, our last miles shrink, and even batching becomes possible, which allows our delivery partners to service more orders in their available time.

"As a result, earnings per hour for our delivery partners have consistently continued to increase, led by densification increasing the ability to fulfil more orders in the same available time, as well as a result of inflation (including competition-led, especially during high-demand periods like festivals or low-supply periods like rains)," Swiggy said in the letter to shareholders.

During the quarter under review, Swiggy's revenue from operations shot up to Rs 6,148 crore, from Rs 3,993 crore a year ago, a regulatory filing showed.

However, its total expenses also increased to Rs 7,298 crore, from Rs 4,898 crore in the comparable third-quarter period of the last fiscal year.

In the letter to shareholders, Swiggy stated that over the past 4 quarters of heightened competition, the company has moved some amount of consumer-facing investments around the Profit & Loss to fulfill key business objectives that lead to longer-term structural improvements.

During the third quarter under review, Swiggy's food delivery business Gross Order Value (GOV) growth accelerated to 20.5% YoY, to Rs 8,959 crore.

Meanwhile, Instamart's GOV grew by 103% YoY, clocking Rs 7,938 crore. Average order value increased by 39.7% YoY to reach Rs 746.