Adding to the platter: Swiggy looks to raise $50 million in financial edge over Zomato
MUMBAI: Food delivery startup Swigyy (Bundl Technologies Pvt Ltd) is in talks with potential investors to raise at least $50 million in fresh funding, a move that is likely to give the company significant financial heft over rival Zomato Media Pvt Ltd, said two persons aware of the development.
Swiggy is in talks with South African media company Naspers Ltd and Chinese conglomerate Fosun International Ltd to raise fresh capital. Existing investors are likely to participate, these people said on the condition of anonymity.
Swiggy is among the best funded food delivery startups, having raised at least $75 million in equity from Accel Partners, Bessemer Venture Partners, Harmony Partners, RB investments, Norwest Venture Partners, SAIF Partners and Apoletto, the personal investment firm of Russian billionaire and founder of DST Global, Yuri Milner. Besides, Swiggy has raised about $8 million in venture debt from InnoVen Capital.
This is second only to Zomato’s $224 million among home-grown food technology startups.
“Swiggy has ample cash in the bank but they want to strengthen the war chest further. With this round, they will get some financial cushion. The existing investors are likely to pool in at least $20 million,” said one of the two people cited above. A deal is yet to be closed, this person added.
Swiggy did not respond to an email seeking comment. Naspers declined to comment.
Swiggy currently operates in eight cities: Bangalore, Delhi, Mumbai, Chennai, Pune, Gurgaon, Hyderabad and Kolkata. The company is also piloting its own kitchens in Bangalore.
Swiggy competes with the likes of Zomato, Foodpanda India and Runnr (Carthero Technologies Pvt Ltd), the entity created after the merger of food delivery start-up TinyOwl Technology Pvt Ltd and hyperlocal delivery start-up Roadrunnr.
Food startups are among the segments worst hit by the slowdown in funding, which prompted companies to hold back on expansion while burning huge amounts of cash to lure customers through offers and discounts.
Some food startups such as Dazo and Eatlo shut shop, while others were acquired. For instance, hyperlocal grocery delivery start-up Grofers bought Spoonjoy.
Swiggy posted a near 65-fold increase in losses for the fiscal year ended March 2016, indicating heavy cash burn in food startups, Mint reported on November 18, citing Registrar of Companies.
Swiggy’s revenue rose to ₹23.59 crore for the year ended March 31 from ₹11.59 lakh a year earlier. Losses bulged to ₹137.18 crore from ₹2.12 crore in fiscal 2015, the company’s filing with the Registrar of Companies shows. Total expenses stood at ₹160.77 crore, implying that Swiggy burnt about ₹13 crore per month in FY16.
Swiggy’s peers in the US such as Postmates and DoorDash charge a fee of $3-7 for each delivery. According to industry experts, the average order value in the US is around $20, significantly more than the average ₹300-400 in India. Consequently, delivery firms in India, which charge clients a commission of 10-20% of the order value, end up losing money on every delivery that costs upwards of ₹50.
To be sure, Swiggy charges consumers an additional fee of ₹50 for orders less than ₹250, a move which has not only helped the company pare losses, but also increase average order value, co-founder and chief executive Sriharsha Majety said in an interview in November 2015.
ACCORDING TO EXPERTS, THE AVERAGE ORDER VALUE IN THE US IS AROUND $20, SIGNIFICANTLY MORE THAN THE AVERAGE ₹300400 IN INDIA