Swiggy co-founder says over-hiring a mistake as he fires 380 employees

• Foodtech startup Swiggy has announced that it is firing 380 employees as part of its restructuring exercise.
• The company’s founder and CEO Sriharsha Majety delivered the news at a townhall meeting and admitted that “overhiring was a case of poor judgement”.
• Impacted employees will receive a minimum of three months pay, apart from other assistance, Majety said.
• Swiggy will also shut down its meat marketplace very soon.

Foodtech startup Swiggy said on Friday that it is letting go 380 of its employees as part of a restructuring exercise. The company’s co-founder and CEO Sriharsha Majety delivered the news in a townhall meeting.

“In this process, we will be bidding goodbye to 380 talented Swiggsters. This has been an extremely difficult decision taken after exploring all available options, and I’m extremely sorry to all of you for having to go through with this,” Majety said in an internal email to the affected employees, which was seen by Business Insider India.

Majety said the employees who have been laid off will receive a minimum three months of pay. The payout will differ for employees – and can vary between three to six months pay, depending on the employee’s tenure and grade. They will also be entitled to 100% variable pay and incentives, as applicable.

Apart from this, the conditions for joining and retention bonus, will also be waived off, while the vesting period for employee stock ownership plan (ESOP) will be extended to the nearest quarter from the last working date of the employee, allowing them to liquidate their stock options.

Overhiring a case of ‘poor judgement’, says Majety

The testing macroeconomic conditions in 2022 due to the Russia-Ukraine war causing inflation to spiral, and central banks raising interest rates to tame it, has resulted in companies around the world announcing massive layoffs.

Swiggy has joined those companies, and one of the reasons for it, according to Majety, is that the company “overhired” in 2021.

“In 2021, driven by a surge in demand during the second wave, our food delivery business grew very strongly. In addition, we’d also found strong early success with Instamart. With some definite exuberance about the future, we invested into building out our teams to be able to cater to the impending needs of the categories,” Majety said.

However, with recessionary concerns in 2022, the company says it has had to advance its profitability horizons for both its food delivery business as well as Instamart, its quick commerce service.

One of the reasons behind this is the slowdown in growth rates of its food delivery business, which is Swiggy’s bread and butter business.

“The growth rate for food delivery has slowed down versus our projections (along with many peer companies globally). This meant that we needed to revisit our overall indirect costs to hit our profitability goals,” Majety said, adding that Swiggy has right-sized its other indirect costs such as infrastructure, office, facilities, among others. Employee cost was the next one on the chopping block.

“Our overhiring is a case of poor judgement, and I should’ve done better here,” Majety added.

He also announced that Swiggy will shut down the meat marketplace “very soon”, blaming it on not being able to hit the right product market fit. However, Swiggy users will still be able to order meat through Instamart.

Have enough cash, but don’t want to use it as a crutch, says Majety

Majety also noted that while Swiggy has enough cash reserves to weather tough times, he does not want to use it as a crutch and instead focus on securing the company’s long-term prospects.

Prosus, one of the Swiggy investors, had said in its report that the foodtech startup had witnessed a significant growth in its food delivery business, which registered a 38% increase in the first six months of 2022.

Swiggy’s gross merchandise value, or total sales, also grew 40% in this period to $1.3 billion, while its rival Zomato clocked total sales of $1.6 billion in the same period.

However, Swiggy’s losses also continue to rise – the company reported a net loss of ₹3,629 crore in FY22, more than doubling from ₹1,617 crore in FY21. The company is said to be preparing for an initial public offering worth $1 billion.

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