How dining and events could be Swiggy’s next growth engine

It has been nudging consumers with attractive discounts to eat out since 2022 when it acquired dining out and restaurant tech platform Dineout from Times Internet, reportedly for $200 million in an all-equity deal. 

It aimed to capitalize on Dineout's network of 50,000 restaurant partners by integrating it with the Swiggy app, which had 15.99 million average monthly transacting users as of June end.  

Despite entering the space years after its listed rival Zomato Ltd, Swiggy’s out-of-home consumption vertical—including Dineout for table reservations and SteppinOut for events ticket booking—generated a gross revenue of ₹45.8 crore in the June quarter of 2024-25. 

Also Read: Inside Swiggy's Journey: Phani Kishan Addepalli on a decade of disruption

Though just a fraction of Swiggy’s overall first-quarter revenue of ₹3,222 crore, the food-tech company sees immense potential in the dining-out business.

“Most of these branded restaurants are on online food delivery platforms as online discovery has become increasingly important to attract a wider consumer base with digitally-native consumers turning to these platforms for dining out decisions," it said in its IPO filing on 26 September. 

However, making money from a vertical that is still a small part of its much older and now profitable rival is easier said than done.

Zomato, which acquired Paytm’s events ticketing business for ₹2,048.4 crore in August, has been doubling down on its going-out business. It claims the dining-out business is now operating at a run-rate of over ₹4,184 crore annualised gross order value (GOV)—a metric that indicates the total amount charged by the platform to the user, including the value of goods, delivery and platform charges and taxes.

For Zomato, the business is already profitable.

Also Read: How Zomato and Swiggy are sparking a boom for small-city eateries

Its GOV in the June quarter was ₹1,268 crore, while it made a revenue of ₹95 crore. The food delivery aggregator, which reported a net profit of ₹253 crore in the first quarter, compared to the year-ago's ₹2 crore, hasn't disclosed how much of it came from its going-out business. 

In comparison, Swiggy's GOV for out-of-home consumption stood at ₹657 crore in the April-June period. And it made a loss of ₹13.1 crore in the quarter, though it was 73% less year-on-year.

The opportunity

India’s $5.5 trillion food services industry—food delivery and dining out—is expected to reach $10 trillion by 2030, thanks to increasing urbanization and the younger population, according to a July report by Swiggy and Bain & Co.

According to the report, online food delivery is expected to grow at a faster rate of an 18% compound annual growth rate (CAGR), contributing 20% to the overall food services market by 2030, up from the current 8%.

But it's the changing eating-out habits that lend weight to food aggregators' dining-out plans. While most Indian consumers step out to eat only on special occasions, the younger population, especially Gen Z, is eating out more frequently. And this frequency is expected to rise to 7-8 times a month by 2030, the report said.

Besides, as Swiggy said in its draft red herring prospectus, "the high average order value (AOV), along with a relatively higher (gross) margin capture potential, increase the attractiveness of the segment for online food delivery platforms." 

Also Read: Zomato is winning the contest with Swiggy

“The AOV here is at least four to five times that of the online food delivery segment, and the gross margins are significantly higher given the only direct costs involved are the payment gateway costs and smaller overheads (mostly tech maintenance costs), this segment enjoys high profitability and operating leverage," it added.

Swiggy's dining-out AOV touched ₹3,236, compared to food delivery's ₹436, in the first quarter.

Advertising is the real business  

To be sure, Swiggy makes money from its out-of-home consumption vertical through a mix of pre-agreed commissions charged to restaurants, ticket sales, advertising revenue from restaurant and brand partners, and platform fees charged to users.

Mint reported on Thursday that affluent Indians are increasingly chasing experiences, including concert tickets, quick weekend getaways, and reservations for eating at top restaurants—even if it means spending beyond their means. Diljit Dosanjh and Coldplay concerts are the latest examples. 

This spending that stretches to travel, live events and dining could reshape how companies market and offer their products, offering a gold mine for food-tech companies such as Swiggy and Zomato.

“There’s an evident shift in trends, which gives food delivery players a sizeable opportunity. Tapping the youth will be crucial for sustained business in the vertical. More than 30% of our monthly customers pay using Swiggy or Zomato apps," said a Delhi-based restaurant owner on the condition of anonymity.

Karan Taurani, analyst at Elara Capital, noted that India’s casual dining market is growing in double digits and giving tough competition to quick-service restaurants.

Also Read: Zomato steers ahead in food delivery race. Is Swiggy far behind?

A healthy dining business can help attract significant user traffic to the platform and, in turn, drive up advertising revenues, he added.

The Prosus-backed food-tech company attributed the vertical’s 2023-24 performance—a 102% year-on-year increase in gross revenue to ₹157 crore—to a rise in commissions and advertising fees, user fees and incremental revenue from ticket sales for various events.

“Our margins continue to improve rapidly, and the business is moving towards break-even," the firm said in its 2023-24 annual report.

Moreover, the Swiggy One membership programme and the HDFC Bank co-branded credit card are expected to increase user interaction on the platform. 

“We aim to increase users and order frequencies on our platform through additional benefits, which include our Swiggy One membership programme," Swiggy said in its IPO filing.

It's a long road

“Swiggy is just making its initial inroads into the dining space, whereas Zomato started off as a restaurant discovery platform in 2008. While the initial numbers are modest, there’s a long way to go," said Elara Capital's Taurani.

Swiggy’s success in the dining business also lies in maintaining stable relationships with restaurant partners, a proposition both Swiggy and Zomato have previously struggled with.

In 2022, many eateries across cities delisted themselves from Swiggy Dineout, raising concerns over deep discounting and cashback that left restaurants with very little earnings. Zomato, too, has been at loggerheads with restaurants over alleged anti-competitive practices.

Also Read: Zomato, Swiggy hunger for demand uptick for better delivery

"The relationship has become slightly better now because many eateries have realised that they are dependent on online food aggregators for consistent business," said the restaurant owner quoted above.

Swiggy’s average monthly active restaurants in the dining vertical stood at 33,352 in the June quarter. Zomato has not disclosed its restaurant figures.

“Swiggy must invest more towards expanding dining initiatives and marketing efforts," Elara Capital’s Taurani added.

Until then, Swiggy's main business will continue to come from food delivery and its quick-commerce arm, Instamart, which account for nearly 55% of the platform's total business. Operating revenue in the food delivery vertical was ₹5,160 crore, while the quick-commerce business made a gross revenue of ₹978 crore in 2023-24.

Swiggy plans to allocate ₹982 crore—around 27% of the proceeds—to expanding its dark store network through its subsidiary Scootsy Logistics Pvt. Ltd. This investment will support the growth of Swiggy Instamart.