Very warm welcome, Prara and Rahul. Happy Diwali and what a day to have you with us to discuss your public issue. Lots of eyes on the numbers. I want to start by asking you: why this IPO now? The valuation seems to be at the same level as your last funding round. Take our viewers through what you intend to do with the proceeds, including the portion that you perhaps have marked for growth strategies in the future.
Thank you so much, Siddharth, for having us in front of your viewers. Happy Diwali to everyone listening in. It is a big, big milestone for us in the company's journey, and it's our next phase as a company. As for recording in progress, why the IPO? I think it's not something that is sudden. It was always one of the most logical next steps for us as a company after having raised institutional capital over these years. For us, we were just waiting for the right time to be ready to do that. Over the last two or three years, as we've shaped the business in a way that we were feeling excited about when we looked inward, we were feeling excited about how we were going about the overall progress of the business. All of this coming together meant that we felt like now we are ready for our next step in our life as a public company. It is a broad — we understand it's a huge responsibility of broadening the shareholders, stakeholders, everyone as you do this. So everything on our mind was readiness, and when we felt it in the bones, we said let's go.
Four times a year at least to deal with the press, to deal with analysts, to deal with con calls, so I guess you are also mentally prepared for that, and in your daily and quarterly schedules you will have to keep that in mind. But I want to take our viewers through some of the headlines that have been generated since yesterday when you spoke to the press about this. This is quick commerce. A couple of headlines say that quick commerce will be bigger than food delivery. You are also quoted as saying that quick commerce cannot win via cash burn. Put that in context for our viewers because this is one of the key things in terms of future growth that a lot of investors will be looking forward to.
I think already for the quick commerce business, in the last quarter that we published, it was 40% of the food delivery business, so it's at meaningful scale and it is growing at a much faster pace than the food delivery business, also because of how large the category is and how well everyone in the category is doing. We're doing very well, and the coming together of all of these means that we do believe that quick commerce will surpass food delivery in the next few years. It's not going to be very long; it's just a function of how large both the businesses are relatively and how much they're growing in relation.
Rahul, if I may ask you to expand on that answer in terms of quick commerce. What's the strategy that you have in mind? Because the space has other strong players. How do you intend to invest in ramping this up, and what are the key metrics that you will consider for this business?
Sure, thank you so much, and wishing you and your viewers a very Happy Diwali. I think what we are looking at in the overall space is that consumers are reimagining what the future of quick commerce should be on an everyday basis. There are more categories getting added on a daily basis, there are more SKUs getting added, and we do believe that we have to keep redesigning the format of the business every quarter to meet the consumer expectations towards that. One thing that we have done in the recent past is to increase the size of our dark stores. We have doubled the availability of number of SKUs in these dark stores over the last 12 months, and we are also experimenting with larger format dark stores which would be two to three times the size of a normal dark store. So these are the various formats in which we are going to experiment to meet the ever-growing consumer needs in this business.
Thanks for that. Sriharsha, coming back to you. Other analysis of your performance and plans, and I'm quoting one more, says that if Swiggy is to outpace Zomato in the coming decade, incremental gains in market share or marginal growth will not be enough. The company will need to deliver new products that expand its total addressable market. Because you've been so hands-on when it comes to product, what are your plans and how would you answer this question that has been raised?
So yesterday also we were asked how are you going to gain share in food delivery, how are you going to gain share in quick commerce, and we actually answered the same: only execution is not going to be enough. Execution and innovation both are going to be incredibly important, and we're ready for it. I think we're firing this year at least on the innovation spectrum. We've launched a slew of new things, and with most innovations, some of them work, some of them don't, but we have it in our DNA and we should count on our ability to deliver on this promise in the next few years. But I totally agree with the statement that only execution is not going to be enough; execution and innovation both are important.
What is the innovation pipeline looking like at this stage? What can you share with our viewers as to what your future thinking is in this regard?
Yeah, I'll give you maybe a few peeks into the future that we think should exist. Something that we launched a month back, three weeks back, is a quick commerce version of food delivery. Over the last two or three years, the country's gotten more and more used to 10-minute delivery of essentials, and the insight was maybe food delivery starting to feel a little slow at 30 minutes. We said, can we actually challenge ourselves because there are so many restaurants across the country who are able to prepare food really fast? Can we take all the learnings from quick commerce and deliver even food really, really fast? We launched an initiative called Bolt, where now every fast prep restaurant like a Chai Point, a Starbucks, restaurants like these that give you food very fast anyway, we've converted them into a 10-minute restaurant where any consumer close by can get their food in 10 minutes. So that's one big pilot. We believe it will open up new consumption occasions and use cases. Even on the Instamart side, in an industry first, we launched pharmacy as a pilot in the last week in the quick commerce business. I could go on and on, but I think this year the wheels are turning really, really well for the innovation pipeline, and we remain quite excited.
I have to share this with you and our viewers. Just earlier this week, the boss of India's and one of the world's largest stock exchanges said that India, because of its digital backbone and the entire regulatory framework, is almost ready for real-time settlement. I kind of when you say 10-minute food delivery, it's as intense as it can be. But what about your revenue and your profitability? Because beyond the plans, a lot of investors will be looking at your forecast with regard to when you see breakeven and profitability being achieved, considering what the other rival in the market has been doing as far as numbers are concerned.
Sure, I can take that. So last year we did 35,000 crores in our overall gross order value across the three large businesses of food delivery, quick commerce, and the dining out vertical. We have grown at a CAGR of 32% over the last three years, so very, very strong topline growth. This has also led to our food delivery business becoming profitable on a fully loaded EBITDA basis. This year on quarter one, we delivered a 0.8% positive EBITDA. Our contribution margin has been expanding both in the delivery business as well as in the quick commerce business. Our monetization levers have started to kick in meaningfully, especially the advertising engine in both the businesses is firing really strong for us right now. Our focus on variable costs as well as fixed costs has meant that we are able to deliver both contribution margin gains as well as operating leverage in each of the businesses. So yes, while we can't give specific guidance and more of that we will share during our quarterly earnings releases, we are very, very hopeful of the journey ahead, having already turned one business fully profitable.
For those retail investors who may not have pored through the details, would it be possible for you to explain your current percentage contribution in terms of your overall revenue mix and some numbers specifically about how your ad business has been performing and the growth that you see?
Sure. So in the food delivery business, our contribution margin was 6.4% in quarter one, and this has seen a consistent increase from close to say 3% 18 months ago, and therefore the result in the EBITDA that came in at 0.8%. In our quick commerce business, which went through its journey of investment cycle, the expansion that we did on our supply chain network meant that from a negative 23% contribution margin in FY23, we went down to negative 6% in FY24 and further down to 3% in the first quarter of 2025. So a very, very strong trajectory as a result of the focus on revenue as well as the variable costs. On advertising, we have seen in the restaurant and the food delivery business a widening base of the restaurant partners participating on our platform, and in the quick commerce business we are seeing significant demand from the brand partners. FMCG companies and direct-to-consumer brands are wanting to reach out and focus on their reach out to their set of consumers. So a very, very broad-based participation, and we do expect this to continue in the future.
One more follow-up, Rahul, and this is to do with some commentary on how you have reduced the OFS component of the issue. Care to expand on why that happened and what's the broader thinking there?
