A deliveryman working with the food delivery app Zomato sits on his bike in a business district in Mumbai. Photo: AFP

The prolonged lockdown in India to contain the spread of the Covid-19 pandemic has taken a heavy toll on online food delivery platforms such as Zomato and Swiggy.

Although the government had included food deliveries among the list of essential services, they are unable to function in a full-fledged manner as most restaurants remain shut and some open only for home delivery facilities.

About 95% of them have gone offline from food delivery platforms due to insufficient supplies and staff. On the other hand, orders from customers have also fallen substantially as people are worried that the delivery person may be infected with the virus.

These platforms are now looking to cut down their expenditure to salvage cash for their survival in the long run. In the latest development, the Bangalore-based Swiggy, which is backed by South African internet giant Naspers, announced it will lay off 1,100 employees, or roughly 14% of its staff, over the next few days.

In an email to employees on Monday, Sriharsha Majety, the co-founder and chief executive, said the lay-offs would take place “across grades and functions in the cities and head office.”

The company will provide three months’ salary to dismissed staff and offer an extra month for every year the employee had worked there. This support includes healthcare and wellness benefits with medical insurance for the employee and nominated family members until December 31, 2020.

The startup will further provide help in career transition with an “acquisition team assisting impacted employees round the clock in identifying suitable opportunities and providing necessary career support for the next three months.”

Swiggy is planning to cut some of its private brand kitchens, which include The Bowl Company, Homely, Goodness Kitchen and Breakfast Express. It also runs 30 private label kitchens across Mumbai, Delhi, Hyderabad and Bengaluru.

The company’s current monthly cash burn is US$20 million and it plans to bring it down to $5 million. Last May it was $40 million. Swiggy’s 2019 financial year wage bill was 40% of its revenue of 13 billion rupees ($171 million).

Swiggy’s order numbers fell 70% after the lockdown was imposed and this badly affected its revenue. The company recently closed a $150 million funding round led by Naspers.

On Friday, Swiggy’s rival Zomato, which is funded by Alibaba’s Ant Financial, decided to cut its workforce by 13%, or about 520 jobs. It also announced a six-month pay cut of up to 50% for its remaining employees, according to local media reports.

In an email to employees, Zomato co-founder and Chief Executive Officer Deepinder Goyal said the company does not foresee enough work for all its workers. “A large number of restaurants have already shut down permanently, and we know that this is just the tip of the iceberg. I expect the number of restaurants to shrink by 25-40% over the next 6-12 months,” Goyal added.

Employees impacted by the lay-off will be paid half their salary for six months and the company’s outplacement teams will help them look for jobs elsewhere. The contract staff will be given two months’ severance pay.

The previously allocated employee stock options will continue during this period, and the current health insurance, wherever provided by Zomato, will continue.

As for pay cuts, they will be effective from June and depend on the salaries drawn by the employees. The upper limit will be 50%. To reduce real estate costs, Zomato will allow employees partial or full-time work from home. The company runs 150 offices across the world.

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