SUMMARY
The Foodtech Startup Was Previously In Discussions With SoftBank And Flipkart For A Potential $250 Mn Investment
After Flipkart and SoftBank, Bengaluru-headquartered foodtech startup Swiggy has reportedly initiated discussions with Chinese investment conglomerate Tencent and existing investor Naspers for a potential $150 Mn-$200 Mn investment.
If the deal goes through, it would raise the online food delivery platform’s post-money valuation to $600 Mn-$650 Mn, sources revealed. Swiggy was last valued at $400 Mn when it raised $80 Mn in Series E funding from South African Internet giant Naspers, SAIF Partners and others.
According to some reports, the latest round could see Naspers forging a strategic partnership with Tencent to pump around $150 Mn-$200 Mn in the foodtech startup.
An email query sent to Swiggy’s communication team awaited response till the time of publication.
Prior to this, Swiggy was in talks with Masayoshi Son-led SoftBank for a $200 Mn-$250 Mn fundraise. At the time, it was reported that SoftBank was looking to pick up a minority stake in the food delivery startup.
Interestingly, Tencent was reportedly planning to co-invest in the round with SoftBank, apart from pouring an additional $50 Mn funding in Swiggy. This, according to sources, would have taken Tencent’s proposed investment in the startup to around $100 Mn.
Reports of Flipkart initiating acquisition talks with Swiggy first surfaced in October 2017, when it was said that the ecommerce player was gearing up to diversify its business through acquisitions and investment. In the third week of November, The Ken reported that Flipkart was preparing for a possible infusion of $50 Mn in Swiggy.
As per some sources close to the development, the fallout of discussions with SoftBank could be because the Japanese behemoth recently finalised a $7 Bn investment in cab aggregator Uber, which owns and operates food delivery platform UberEATS. As part of the deal, SoftBank has reportedly acquired a 15% stake in Uber.
Foodtech Startup Swiggy Growing At A Rapid Pace
Founded in August 2014 by Sriharsha Majety, Nandan Reddy, and Rahul Jaimini, the platform is currently functional in over ten cities and has reportedly partnered with 20,000 restaurants. Headquartered in Bengaluru, the foodtech startup has raised a total of $155.5 Mn funding to date.
Swiggy reported a 6x jump in revenues from $3.6 Mn (INR 23.6 Cr) in FY16 to $20.6 Mn (INR 133 Cr) in the last fiscal year. However, losses have also increased by 50% to $31.7 Mn (INR 205 Cr) from $21.3 Mn (INR 137.18 Cr) in FY16, as per its regulatory filings.
In an interaction with Inc42, a spokesperson from Swiggy stated that the company clocked 4 Mn orders in July 2017 with a steady increase since. In last several months, the company has been introducing new products and services. In September 2017, it was reported that Swiggy was in the process of building a new cloud kitchen vertical. While Zomato’s first Cloud Kitchen came up in Dwarka in March 2017, Swiggy won the race when it launched its cloud kitchen, “The Bowl Company” in January. The cloud kitchen caters to select areas in Bengaluru and provides Pan-Asian, Continental, Indian cuisines.
Later in November, it announced the launch of a strategic initiative aimed at reaching more customers and making its delivery more seamless. Dubbed as Swiggy Access, the new service allows restaurant partners to set up kitchen spaces in areas where they do not have a physical presence.
Lately, the company has been doubling down in its efforts to strengthen its senior leadership. In December, for instance, it hired Vishal Bhatia as the CEO of New Supply and former OLAM executive Rahul Bothra as its first ever Chief Financial Officer. Consequently, Cherian will assist Bhatia in building the vertical and Swiggy Access through 2018.
A week later, Swiggy announced the acquisition of Bengaluru-based gourmet Asian food startup 48East. As per the terms of the deal, 48East founders Joseph Cherian and Nabhojit Ghosh have joined the Swiggy team, with the former acting as the COO of Swiggy’s New Supply business line.
According to a study by Netscribes Research, the foodtech sector is expected to expand by 34%-36% between 2015 and 2020. At a time when the segment is witnessing the entry of new players like Google Aero and UberEATS, Swiggy is focussed on bolstering its services against its biggest rival, Zomato.
Incidentally, in November 2017, reports surfaced that Zomato and Swiggy were holding discussions for a potential stock-based merger, on the basis of a 4:1 share swap. However, as per sources, the talks ultimately failed due to differences in valuations and business alignments.
Irrespective of whether a merger between the two fructifies, it would be interesting to watch how Swiggy utilises the funding from Naspers and Tencent to cement its position in the Indian foodtech space.
