Following the completion of the all-equity transaction, the online meal delivery decacorn has also acquired a stake in Kitchens@.
In a share swap transaction, Swiggy has handed over ownership of its ‘Access Kitchens’ company to Kitchens@. With the acquisition, the online meal delivery decacorn became a stakeholder in Kitchens@ and joined the board of directors of the company.
Access Kitchens was initially introduced by Swiggy in the year 2017. Under this business model, Swiggy gave its restaurant partners the ability to set up kitchens in locations where the company did not already have a presence. Both increasing the amount of choice available to clients and broadening the partners’ potential audience were primary goals of the programme.
Swiggy has high hopes that Kitchens@ will be able to capitalise on the company’s expertise on local demand and choice of partners to expand the variety of food alternatives available. In a news statement, Kitchens@ CEO Junaiz Kizhakkayil stated that the acquisition will help the company grow its footprint in four cities across 52 sites and over 700 kitchens.
Kizhakkayil continued by saying that the company’s objective has “always been to make fresh food accessible through enabling a super-efficient food delivery ecosystem.”
According to the press release, the recent deal enables Kitchens@ to achieve a combined annual GMV of $65 million (about Rs 520 crore). Kitchens@ also has the goal of reaching $100 million in revenue over the next six months.
Kitchens @ noted that it has already received letters of intent to work with it using a ‘Master Franchise Model’ from more than 40 national and international brands.
Kitchens@, which was established in 2018, is located in Bengaluru and describes itself as a kitchen aggregator. It offers turnkey solutions to food and beverage brands that want to expand their presence by providing end-to-end services. These services include infrastructure, technology, and operation services, amongst others. The amount of funding the company has successfully raised thus far stands at $17.5 million.
But, Swiggy’s most recent move comes at a time when venture capital investment is becoming increasingly scarce, particularly for later-stage firms. In an effort to save expenses, Swiggy terminated the employment of more than 350 of its staff members in January of this year. The change had an impact on close to 3 percent of the company’s overall staff.
According to an exclusive revelation published by Entrackr a month ago, Swiggy is also getting ready to go public in the near future.
One of the insiders, who spoke on the condition of anonymity, revealed that “Swiggy has put a plan in place to be ready for IPO by September of this year.” But, in order to file pre-IPO documentation with the relevant authorities in India, it will take another 4-6 months.
Sources claim that Swiggy’s board of directors has given the company a clear directive to float on the Indian stock exchange some time after the third quarter of 2024.
In the meantime, Swiggy, whose market share fell by 27% in FY21, was able to double its size and reach Rs 5,705 crore by the end of FY22. According to a research carried out by Fintrackr during the relevant time period, the company’s annual losses skyrocketed to a total of Rs 3,629 crore.
In FY22, the company saw a decline in its EBITDA margin of 918 basis points, bringing it to a level of -52.88%. Over the same time period, Swiggy’s cost of goods sold was 1.68 Indian rupees each dollar of operational income it generated. In addition, the company’s cumulative losses totaled 22,880 billion rupees.
The partnership with Kitchens@ is a very unusual move, as it diverges from the typical practise of huge unicorns like Swiggy of getting rid of underperforming partners. For one thing, it appears to be a last-ditch effort to determine whether or not a younger, more specialised business can shift the power balance at Access Kitchens. With an all equity deal and a seat on the board of Kitchen@, it will come as no surprise if the big reward for Kitchens@ is a wholesale acquisition by Swiggy, provided that it demonstrates sufficient competence to have an impact with the new addition. Kitchens@ will also receive a seat on the board of directors. This is the kind of business transaction that is made possible by the startup ecosystem in Bengaluru. So it is up to the main players to come through with their promises.