Speculations around Flipkart don’t seem to cease ever since the company announced its plan to roll out a one stop mobile app in June 2017. Just after the company is said to be in talks to back companies in the foodtech and hyperlocal space, now a report by The Ken has indicated a possible infusion of massive $50 Mn in Swiggy.
As mentioned in The Ken (paywalled report) Chinese investor Tencent whose portfolio includes firms such as Practo, Ola, Flipkart, and Hike, may also follow this investment round with Flipkart in the Bengaluru-based foodtech startup.
Earlier, another foodtech unicorn Zomato was also said to be in talks with Swiggy for a possible merger, however, the talks were closed due to differences in valuations and business alignments.
What Makes Swiggy So Vulnerable Yet An Exciting Bet Now?
Since its launch in 2014, Swiggy has given a tough battle to existing foodtech behemoths of that time – Zomato and Foodpanda. The startup was also able to pass through the winter storm of 2016 as well as the market slow down since then, but at a cost.
While its arch-rival Zomato today boasts a valuation of $1.4 Bn, Swiggy was last valued at $400 Mn when it raised $80 Mn capital from Naspers, SAIF Partners, and others in May 2017. Foodpanda, after getting acquired by Delivery Hero in May 2017, also got an increased support to build up its share in the Indian foodtech pie.
However, the team is still optimistic and is pushing in hard to turn the tables. In the last several months, Swiggy has been introducing new products and services as part of its efforts to make a comeback, after several setbacks in the form of controversies. In November 2016, Swiggy had a total of 63,804 orders per day, which grew to 78,417 daily orders in January 2017.
In a recent interaction with Inc42, a spokesperson from Swiggy stated that the company clocked 4 Mn orders in July with a steady increase since. It has partnered with more than 20,000 restaurants. In the month of September, Swiggy also announced plans to build a new cloud kitchen vertical, in a bid to bolster revenues and has recently introduced its central kitchen programme with Swiggy Access.
Why Swiggy As Well As Foodtech A Valuable Bet For Flipkart?
As mentioned in The Ken report by an investor close to the development, “Flipkart has kapda (clothes with Myntra), now roti (food with Swiggy), all it needs is makaan (house) and it will complete the three basic necessities in one app.”
With Flipkart looking to soon launch its one-stop app, and the online grocery pilots already in the process the company can readily utilise the existing delivery fleet of Swiggy in near future. Plus, with electronics and mobile phones are the most popular yet low margin categories, Flipkart is keen on building new revenue avenues for a long time now.
Moreover, Flipkart has already turned its image from being only an ecommerce retailer to a Group of companies, ever since it secured around $4 Bn funding grant from investors such as Tencent, eBay, Microsoft and Softbank earlier this year. Recent investments made by the company and the launch of several Private labels, specifically the Made for India brand Billion and the recent launch of its own Smartphone Billion Capture+ are clear examples of that.
In all, Swiggy is currently standing at a place where both a merger or an investment could be a tipping point for the foodtech startup. It could help the company to further go ahead with its ambitions but would certainly require the company to lose a major portion of its stake. Although Swiggy has already denied all speculations around merger with Zomato, in case the deal happens, the joint entity would emerge as a strong player with the much larger scope of expansion as both are lately introducing almost similar strategic moves. On the other hand, if Swiggy eyes the investment opportunity, possibly with Flipkart, it will have the opportunity to leverage the unicorn growth with investors like Tencent on board. Moreover, the entry of heavily-funded players like Google Areo and UberEATS will further complicate the situation for Swiggy in the Indian foodtech startup domain, where online food and services market is worth $2.9 Bn. Thus, we might say that its time Swiggy must choose which side it will opt.