According to Inc42, of the 105 food tech startups launched in India, only 58 were active in 2016. Once considered attractive by investors, the market is overcrowded, overfunded, and plagued by price wars as well as weak logistics and delivery infrastructure. Swiggy is a recent entry to this overfunded club.

Swiggy’s Offerings

Swiggy was founded in August 2014 by Nandan Reddy, CEO Sriharsha Majety, and Rahul Jaimani in Bangalore. It was inspired by the thought of providing a complete food ordering and delivery solution from the best neighborhood restaurants to the urban foodie. Its platform offers a single window for ordering from a wide range of restaurants. It has its own exclusive fleet of delivery personnel who pick up orders from restaurants and deliver it to customers.

Its main value proposition is that it has a no minimum order policy on any restaurant and accepts online payments. It has about 12,000 restaurants on its platform, up from 5,000 in 2016. It currently operates in eight cities—Bengaluru, Delhi, Mumbai, Chennai, Pune, Gurgaon, Hyderabad, and Kolkata. It is also piloting its own kitchens in Bengaluru. It has over a million app downloads. The platform recorded 1 million orders in April 2016.

Swiggy charges each restaurant between 20%-25% of the total order value as a fee for its services. In select cities, it charges Rs 30-40 as delivery fee on orders below Rs 150-250. Typically, about 15%-20% of a restaurant’s business is delivered through Swiggy. As of March 2016, it was serving 25,000 orders per day with an average order of about Rs 300. The delivery time is usually between 30 to 60 minutes.

Swiggy’s Financials

Swiggy’s revenue rose 200% to Rs 23.6 crore ($3.6 million) in FY 2016 from Rs 11.59 lakh ($18,000) a year earlier. Losses bulged to Rs 137.18 crore ($21 million) from Rs 2.12 crore ($328,500) in FY 2015. Total expenses were Rs 160.77 crore, almost seven times its revenue. In a bid to control its losses, the company has also started levying surge prices.

Swiggy is venture funded with $155.5 million in six rounds from investors including Accel Partners, Bessemer Venture Partners, DST Global, Harmony Partners, Naspers, Norwest Venture Partners (NVP), RB Investments, and SAIF Partners. It has also raised about $8 million in venture debt from InnoVen Capital.

Last month, it raised $80 million in a Series E funding round led by South African media company Naspers. The company plans to make significant investments in technology, including automation, data sciences, machine learning and personalization. The valuation is estimated to be $400 million. Last year in September, Swiggy was valued at $200 million when it raised a $15 million Series D led by Bessemer Venture Partners.

Swiggy’s main competitor is Zomato, which was founded in 2008. In April, Gurgaon-based Zomato, which offers restaurant listings and food delivery, claimed that its food delivery business grew eight times to $9 million in FY17 while its revenue grew 80% to $49 million. It is slowly inching towards profitability the annual operating burn for FY17 at $12 million, down 81% from $64 million in FY16. Zomato is venture funded with $243.8 million. In 2015, it was valued at over $1 billion but in early 2016, its valuation was slashed to $500 million.

Details of latest financials are not available but Swiggy has reportedly recorded a net profit of $4 million. It also claims to have had 1 million orders in March 2017. Let us say they are on a 12-15 million orders annual run rate, so at most, the annual revenue run rate is in the $12-$18 million range. Burning through $150 million to arrive at a sub $20 million run rate isn’t emblematic of huge fiscal discipline or stellar financial performance.

Swiggy is clearly overvalued and overfunded. To be truly valuable, companies need to operate with more fiscal discipline, less capital and deliver compelling financial metrics. None of that is in sight in this case, even though the service is extremely useful in highly congested cities where not having to plod through traffic for food seems like a heavenly value proposition. While the availability of cheap labor has made food delivery startups all the rage in India, none seems to have worked out the arithmetic of building a sound business for the long term.