Softbank Vision Fund looks to buy stake in Zomato or Swiggy
Vision Fund is evaluating India’s two largest food delivery companies—swiggy and Zomato—and will invest in one of the two, according to two people familiar with the matter.
Zomato’s talks with Softbank have advanced further than Swiggy’s discussions, one of the two people cited above said, requesting anonymity as the discussions are confidential. This person said that Zomato is close to raising nearly $500 million in its next round.
However, if Softbank chooses to invest in Swiggy, the latter could also end up raising at least $500 million, the people mentioned above said. The new funding round, if it goes through, may value Swiggy at more than $2 billion, a 54% jump from its current valuation of $1.3 billion.
Softbank has been evaluating Swiggy for nearly a year, but both parties failed to reach an agreement during Swiggy’s last two funding rounds, the people said. If the talks result in a deal this time, Softbank may become Swiggy’s largest shareholder.
Swiggy (Bundl Technologies Pvt. Ltd), India’s largest food delivery startup, has already raised $310 million this year from a clutch of investors including Naspers and DST Global. Zomato Media Pvt. Ltd, which has closed the gap with its arch-rival in food delivery over the past year, received $150 million in fresh capital from Ant Small and Micro Financial Services Group in February.
Swiggy, Zomato and Softbank declined to comment.
While both companies are well-capitalised, they need to keep raising even more cash in order to win share in a hyper-competitive market. Mint reported last week that Swiggy and Zomato are spending hundreds of crores of rupees on locking in delivery staff. The two companies have also significantly increased spending on discounts and deliveries.
Swiggy and Zomato face competition from Uber Eats and Foodpanda, the food delivery arm of Ola. Ola has said it will invest $200 million to expand Foodpanda. Uber Eats, too, is investing hundreds of crores of rupees in expanding its service. In May, Uber Eats was present in 13 cities, just one year after its launch.
The online food delivery market is expected to reach $4 billion in 2020 from $700 million last year, according to Redseer Consulting. Delivery staff at startups such as Swiggy and Zomato have seen their incomes surge in the past six months as the food delivery companies fight an expensive battle to gain a bigger foothold in this fastgrowing market. Swiggy has raised $465 million till date—the most by an online food delivery firm. Zomato has raised about $375 million.