Indian food delivery giant Swiggy is reportedly looking to divest its kitchen infrastructure business, Swiggy Access, ahead of its initial public offering (IPO). The kitchen-as-a-service business has been offering a plug-and-play solution for restaurants to set up cloud kitchens for over five years, but Swiggy is said to be shedding the business due to real estate and labor challenges.
The company is in the process of selling Swiggy Access to BEENEXT-backed kitchen infrastructure start-up Kitchens@. The deal is understood to be a share swap, valuing Kitchens@ at $40 million and Swiggy Access at $10 million. As part of the transaction, some of Swiggy's own private-label restaurant brands could become clients of Kitchens@ in select locations.
Swiggy has decided to scale back its kitchen infrastructure business from around 200 locations to just 30-35 sites. At its peak, the segment was reportedly burning between $3 million and $5 million per month, and insiders have suggested the model was strong but failed to address the key operational issues of real estate and labor costs.
Zomato, a rival Indian food delivery firm, invested in Kitchens@ back in 2018 and ran its own kitchen-as-a-service operation through the start-up. However, ahead of its own IPO last year, Zomato decided to shut down the vertical altogether.
Founded in 2015, Kitchens@ claims to have 1,000 kitchens across 20 cities in India. It also operates several private-label restaurant brands. Kitchens@ is reportedly partnered with several international food chains and national food tech start-ups including Subway, Domino's Pizza, Wow! Momo, Chai Point, Chaayos, and Mainland China.
Swiggy's retreat from its kitchen infrastructure business follows a tough few months for the company, which was forced to lay off 380 staff as part of a cost-cutting drive to help it achieve profitability. The company recorded a net loss of Rs 3,628.9 crore in the fiscal year 2021-22, compared to Rs 1,616.9 crore in the previous year. However, its total revenue grew to Rs 6,119.8 crore from Rs 2,675.9 crore the year before.
