Sorry about the late edition today y’all. I got swept up in all the Jio news on twitter and then forgot to make dinner and got super hungry. As everyone must’ve seen by now, Facebook announced they have invested $5.7B in Reliance Jio Platforms for a 9.9% stake in the entity. This move definitely helps Jio from a debt standpoint as I had talked about earlier a couple of weeks ago as the entity has accrued billions of dollars of debt in becoming the biggest telecom company in India. Facebook’s play is still unknown but the general consensus seems to be that partnering with Jio will help Facebook gain a foothold in the Indian commerce market (online + offline) and possibly help with government regulations.
Coming to the day’s news, Swiggy’s Cloud Kitchen operations is having a hard time + Paytm is cost cutting a bunch with recent revenue drops.
➡️ Swiggy, the online food delivery platform, announced today that was cutting about 1,000 jobs mostly from it’s cloud kitchen operations with a greater focus on effectively spending money.
➡️ Unlike the US, the lockdown in India has impacted food delivery platforms quite significantly with both Zomato and Swiggy seeing their daily order #s drop from over 3M to under 1M. And the company which currently has a burn rate of $20M/mon is trying to curb it to $5M/mon (and is probably cutting down on advertising + discounting for customers).
➡️ Swiggy isn’t the only cloud kitchen company facing challenges in the current climate, The Information came out with a piece a couple days ago about Travis Kalanic’s CloudKitchens having some tough times with regards to operational costs in terms of real estate.
➡️ Swiggy has also been aggressively pushing it’s cloud kitchen model and already has over 1000 cloud kitchens across the country. This aggressive growth + lower demand might be a large reason for the layoffs as the company is probably focussing on absolutely essential sectors and might also be divulging more resources to it’s grocery vertical.
➡️ Paytm has also seen some drop in demand for several of its offerings with the pandemic and has also had to layoff staff and employ other cost cutting measures.
➡️ Vijay Shekhar Sharma, founder of Paytm, has claimed that the company has cut costs by 15-20% in recent times. The company’s travel & movie bookings have taken the hardest hit (both being non-essential services so the revenue has likely dropped to 0), while utility payments has seen an increase.
➡️ Online transactions across the country have taken a significant hit as only groceries + medicines + essentials are allowed to be sold online and that has trickled down to impact Paytm as well. And as a result, the company is cutting down on marketing costs and cloud services, along with renegotiating rental costs.
➡️ The company has stopped sending recharge and payment confirmation text messages which will save the company several lakhs (I wonder if they still have a minimum spend contract with their SMS service provider).
➡️ It will be interesting to see how Paytm bounces back from this in the post COVID world, the company had already been falling behind Google Pay & PhonePe in the UPI payments space and probably needs to scale up in other verticals to earn revenue to justify its $10B valuation.
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More tomorrow :) BONUS (Tweet of the day): https://twitter.com/abhayjani4/status/1252490654791450625