The catastrophic economic impact of coronavirus pandemic has led to unprecedented layoffs across a multitude of companies. Be it corporate behemoths or startups, all have been equally impacted. The layoffs however have been more common in startups, specially heavily funded ones, since most were on a rapid growth trajectory before coronavirus hit them.
Joining that layoff bandwagon now is India’s food delivery unicorn Swiggy. The food delivery app is laying off about a 1000 employees from its cloud kitchen division, according to a report in Economic Times. The company has confirmed these layoffs, though hasn’t talked about actual numbers.
Against a background of dramatically reduced number of orders due to the nationwide lockdown in India, a plan involving some harsh measures is in place. Swiggy said, that it has now received approval for its cost-cutting plan from the company board. The plans involves laying off of about 40% of the employees are expected, on the basis of their performance review.
According to media reports, this covers more than 300 employees who are poor performers or low-graders.
“As the lockdown gets further extended, we are evaluating various means to stay nimble and focused on the growth and profitability across our kitchens” said a company spokesperson. In addition to employee lay-offs, the company is also cutting costs. From about $20 million, the company will bring its burn rate down to $5 million.
In India, Swiggy competes with Ant financial-backed Zomato which is said to be in the talks of raising $500 million, with the two wrestling to capture the most of India’s $4 billion food delivery market. But things have not looked well for both the companies during the lockdown, as both have observed sharp drops in orders.
From almost 3 million orders a month, both these companies are now processing less than a million orders combined. And while these companies resorted to grocery delivery to offset some loss, food delivery executives testing positive hasn’t helped. Certain states, such as the southern Indian state of Telengana, have completely banned food delivery apps until May. More importantly, a government advisory has asked these companies to function with half its employees.
Until last month, Swiggy had been ramping up its cloud kitchen businesses. The company established at least 1000 of these across 14 cities and had plans to invest $10.5 million more into them. Through the cloud kitchen vertical alone, the company claims to have created close to 15,000 direct and indirect jobs.The Bengaluru-based firm is now in the process of closing down half these kitchens and renegotiating contracts for many, on the basis of their occupancy.
The company also grabbed a $153 million investment from its existing investors recently.
Other Indian startups too have laid off significant workforce. Paytm laid off about 700 employees on Monday. Various growth-stage start-ups have had to trim their workforce and salaries of mid and senior level employees. This includes companies such as Acko Insurance, Travel Triangle, Meesho, shop 101 among others. This is in sharp contrast to corporates, most of whom have announced no lay offs and have pledged to keep the workforce numbers intact. In fact IT giants such as TCS and Infosys have announced resumption of fresh hiring in the coming placement season.
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