Swiggy in talks with Korean funds to raise up to $500M

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Food delivery app Swiggy is in talks with South Korean funds including Korea Investment Partners, Mirae Asset Management, STIC Investments and Neoplux to stitch up a $500 million financing round, said two people aware of the development.

The round is learnt to be led by Swiggy’s largest investor, South African internet giant Naspers, which owns a stake of almost 40% in the company, one of the persons said. Aside of the primary capital, there’s a secondary share sale which is also being worked out, they said. The exercise is expected to value the company at around $4 billion, up from its $3.3 billion valuation previously.

Swiggy’s investment conversations come at a time when it is locked in a discounting war to fend off closest competitor Zomato, with both clocking about a million orders a day. Both have been burning up to $40-50 million monthly to acquire users in a cash-guzzling sector that has been reliant on discounting to ratchet up growth.

“Swiggy needs a large war chest to build a consumer facing logistics network,” said one of the persons. The five-year-old company is looking to expand its footprint across the country, especially in smaller towns and cities. In parallel, it’s also seeking to scale up its services beyond food delivery.

These include a concierge-like service Swiggy Stores, subscription-based homestyle meals offering Swiggy Daily and a cloud kitchen business under Swiggy Access.

Swiggy’s cofounder and CEO Sriharsha Majety didn’t respond to questions. Queries sent to the company’s potential investors also went unanswered.

In December last year, Swiggy raised $1 billion led by existing backer Naspers, along with China’s Tencent, Hillhouse Capital and Wellington Management, valuing the company at $3.3 billion. About $200 million out of the entire round was a secondary sale executed by early investors SAIF Partners and Accel Partners. A similar secondary transaction is likely to be part of this new financing round, sources in the know said.

Over the past year, Swiggy and Zomato have been in discussions with SoftBank for a large investment round. However, multiple sources have said that SoftBank is watching the space closely but is not sure which among the two is a clear market leader. SoftBank would also want the two players to combine forces, something that Alibaba, Zomato’s investor had pushed for till a year ago. “At current levels, the path to building a sustainable unit economics in the hyperlocal delivery business independently continues to be under question,” said the investor cited above.

In an earlier interaction with ET, Swiggy’s COO Vivek Sunder said that he sees growth this year to be largely driven by customer repeats from the top 50 million internet users. This would include expanding restaurant selection and scaling up products, including loyalty programme Swiggy Super, SwiggyDaily, single-serve meals product Pop, and student campus programme Launchpad.

Swiggy’s strategy mirrors that of its investor and China’s largest food delivery network Meituan-Dianping, which launched its 24-hour grocery store business, Flash Order, in 2017, aiming to complete deliveries in 30 minutes.

In fact, food-delivery players globally have been diversifying into other categories to optimise fleet costs as a strategy. Last year, US-based DoorDash signed a pact with Walmart to provide grocery delivery services to retailers and Alibaba-backed Ele.me started offering diversified delivery offerings, with food being the main driver.

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