Amazon India considers investment in online food delivery startup Swiggy

In What’s Happening in Retail by Elargirindia0 Comments

Founded by Sriharsha Majety, CEO, along with Rahul Jaimini and Nandan Reddy, Swiggy is regarded as one of stronger players in a market which has seen several casualties.

 

BENGALURU: Amazon India is considering an investment in online food delivery startup Swiggy and has held several rounds of discussions with the Bengaluru-based startup over the past three months, according to four people directly aware of the ongoing negotiations.

Swiggy has also attracted the attention of other strategic investors, including Alibaba-backed Chinese food delivery venture Ele.me, said the sources. “Everyone is talking since they are doing really well but it is not certain that a deal will be closed,” said one of the people quoted above, who also confirmed that other Chinese investors have approached Swiggy seeking to invest in it.

Founded by BITS-Pilani alumnus Sriharsha Majety, the CEO, along with Rahul Jaimini and Nandan Reddy, Swiggy is regarded as one of the stronger players in a market which has seen several casualties.

It competes with Zomato and Rocket Internet’s Foodpanda. At its last round of funding in August, the company was valued at an estimated $190-200 million (Rs 1,300-1,350 crore).

Several discussions with Amazon
While ET could not determine the exact contours of the transaction or the identity of the other potential investors, negotiations with Amazon have progressed the most.

Swiggy’s executives have held at least three rounds of meetings with Amazon’s India head Amit Agarwal, besides discussions with corporate development head Abhijeet Muzumdar.

According to people aware of Amazon’s operating style, deals typically take 3-4 months to close. Amazon India and Swiggy declined to comment on what they described as “market speculation”.

Ele.me did not reply to emailed questions. The Seattle-based Amazon has expressed interest in the strong consumer focus demonstrated by Swiggy, the sources said. However, it is also keen that Swiggy records gross profits before a deal is finalised.

Swiggy, which has raised about $72 million so far, is yet to achieve break-even. It counts Accel Partners, Norwest Venture Partners and Bessemer Venture Partners as main investors.

Experts are of the view that a deal with Swiggy can help Amazon expand the scope of its grocery delivery business, Amazon Now.

For the Bengaluru startup, a deal with the ecommerce giant can help improve utilisation of its delivery personnel, of whom it employs about 4,000.

Synergies in hyper-local
“There are synergies in hyperlocal cross-utilisation. Amazon will get a big food business and a hyper-local fleet on whose backbone they can grow aggressively in grocery as well,” said an investor in the hyper-local market.

“For Swiggy, getting a high order density will lead to better utilisation of the hyper-local fleet leading to a sustainable business. After food, the next logical expansion would be grocery and Amazon Now does grocery, so maybe that’s the synergy.”

In the past, Amazon has backed hyper-local services company Housejoy, besides buying stakes in companies such as gift cards player QwikCilver and online financial marketplace Bankbazaar in India.

Swiggy is currently focussing on expanding its restaurant base across cities and to break even at an operational level. Its core value proposition is its dedicated delivery fleet to fulfill orders and a zero minimum order.

However, the company has also indicated that in a bid to scale further, it will look at joint ventures with chefs and restaurants to expand the number of offerings. It is yet to scale that product.

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Swiggy is fulfilling close to 40,000 orders per day. Online penetration within the takeout segment was only 2 per cent in India while it was 20-30 per cent in China, the UK and Canada, according to Morgan Stanley.

The investment bank estimates that the online food aggregation business can grow from almost nothing in 2014 to $4.4 billion in 2020.But while the opportunity in the space remains large, startups have been grappling with scale and hyper-competition, as they continue to lose money on every transaction, leading to some players shutting down and others changing their business model.

 

Click Here for Original Source – Economic Times

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