INDIA – South African Internet group Naspers has emerged as the frontrunner to lead a $150-200 million investment in Swiggy, after SoftBank and Flipkart ended independent funding discussions with the online food-delivery platform, according to three people briefed on the matter.
The deal could likely value the three-year-old venture at $600-650 million before the investment, they said. Swiggy was last valued at $400 million when Naspers led an $80-million investment in May.
For the funding round, Naspers, among the world’s largest technology focused investors, could forge a strategic partnership with China’s Tencent Holdings, which would come in as a new investor in Swiggy, one of them said.
Tencent and Naspers have a history of co-investing, if not following each other’s investments, across sectors. Naspers and Swiggy did not reply to ET’s emails seeking details on the deal.
The development comes shortly after Japan’s SoftBank dropped out of talks to invest $200-250 million in Swiggy for a significant minority stake.
Soft-Bank’s proposed $9-billion investment in Uber, announced last week, will give it exposure also to UberEATS, the ridehailing startup’s food-delivery service.
Hurdles to Swiggy-Zomato Merger
In India, UberEATS was launched seven months ago and is present across 6,000 restaurants, clocking about 10,000 orders daily.
Swiggy, the winner of the ET Startup Awards 2017, leads the domestic online food-delivery market by volume, handling more than 140,000 orders a day in India.
Zomato handles about 100,000 orders a day in India and the UAE.
Swiggy’s talks with Flipkart, which had also been in the running to pick up a strategic stake in the company, tailed off primarily due to the online retailer’s insistence on its digital payments platform, PhonePe, being the sole payment channel on Swiggy, which the latter refused.
Currently, Swiggy offers MobiKwik, Paytm as payment options on its app.
Also, Chinese ecommerce giant Alibaba and its payment affiliate Ant Financial’s efforts to push Zomato and Swiggy towards a merger, with plans to invest in the combined entity, got stuck due to strategic and valuation differences, ET reported in October.
While Swiggy is well-capitalised, Ola’s recent acquisition of Foodpanda India forced the company and its investors to go back to the drawing board, with the funding being possibly closed faster than was discussed earlier, said people aware of the developments.
At about 30,000 orders fulfilled per day, Foodpanda is a distant third in the Indian food-delivery market, followed by UberEATS and Google Areo, both of which have been steadily increasing customer discounts while reducing restaurant commissions in a bid to make their platforms more attractive.
The previous 12-18 months marked a period of clean-up for food aggregators, with significant growth in revenues buoyed by a swell in order volumes, thus stoking investor interest in the sector once again.
Swiggy, owned and operated by Bundl Technologies, grew the fastest in terms of revenue in fiscal year 2016-17, growing revenue by six times even as losses increased by 50% to Rs 205 crore.
The company has said that the expansion in losses was congruent with a four-fold increase in order volumes in FY17 even as it managed a 35% reduction in delivery costs.
Swiggy, till date, has raised about $155 million in equity and $8 million in debt, totalling $163 million.
That’s second only to the $225 million raise by Info Edgebacked Zomato.