Mumbai: Food ordering and delivery company, Swiggy, is planning to raise $500 million funding from its existing and new investors. It has initiated the talks with them. If Swiggy is able to raise this funding, the company’s valuation may hit $2.5 billion.
Recently, in June the company raised $210 million funding from a clutch of investors which helped its valuation reach $1.3 billion and making it the fastest entrant in the Unicorn Club. The food delivery app is now looking for the third round of funding in 2018 to take the competition in the food delivery space a notch up.
One term sheet with an estimated valuation of $2.5 billion was offered to Swiggy in July. Though it is still not clear that how much amount the company is planning to raise in this round, but as per the information given by source it is estimated anywhere between $250 million and $500 million. The source also informed that some of the early investors of Swiggy might also sell shares in this round.
New Investors Might Rope In
As per the information available, the Bengaluru-based food ordering and delivery company held talks with a host of new investors which include SoftBank, growth equity firm General Atlantic and a couple of Chinese hedge funds – probably Tybourne Capital and Hillhouse Capital – for the third round of funding.
According to some media reports published last year, several rounds of discussion has held between Japanese investment giant, SoftBank and Swiggy for a potential investment, which includes talk held recently during the last month. It was also reported that an exploratory conversation has held between SoftBank and Zomato.
The existing investors of Swiggy include US-based hedge fund Coatue Management, Chinese on-demand delivery giant Meituan Dianping and Naspers, which holds the largest stake at about 23%, are likely to participate in the upcoming round.
Zomato on the Verge of Raising $300 Million
Swiggy’s investment talks come at a time when rival Zomato is in advanced negotiations to raise $300 million from existing investor Ant Financial and Singapore’s sovereign wealth fund Temasek in a round that could value the Gurgaon-based firm around $2 billion.
In February, Zomato raised $200 million from Ant Financial, Chinese ecommerce giant Alibaba’s payment affiliate, at a valuation of $1.1 billion.
While the capital frenzy in the food technology sector bears a strong resemblance to the peaking investor interest in the space in 2014-15, the current rush of money has more to do with creating a much deeper market over a longer term, especially for the two key players, said industry experts.
Swiggy is looking to actively raise capital for a multi-fold approach that will see it double down on discounts to expand its user base, while also deepening market coverage in existing and newer cities.
Zomato, which too has been steadily expanding its geographical reach for its food delivery offering, has also been increasing discounts and cashbacks to create customer stickiness, as it looks to bump up volumes, especially in southern India where Swiggy leads.
To that extent, both firms have been burning $18-20 million per month, forcing them to raise capital at frequent intervals. Both Swiggy and Zomato saw their monthly cash burn rates grow over five times in three months.
Zomato posts more than 10.5 million monthly orders across India and the UAE, while Swiggy does over 14 million orders in India. UberEats and Ola-backed Foodpanda deliver around 1.8 million and 1.2 million orders, respectively, as per industry sources.