Mumbai | Bengaluru: Swiggy said it has raised $1.25 billion from SoftBank Vision Fund II as well as existing investors Prosus ( formerly Naspers), Accel and Wellington Management, in what is the largest funding round for the online food delivery platform since its launch in 2014.

The company is now valued at $5.5 billion post the fund raise, said people aware of the details.

The investment was made in two tranches beginning earlier this year, with $800 million coming in first from new investors like Qatar Investment Authority, Falcon Edge Capital, Amansa Capital and Goldman Sachs. The second tranche of $450 million was ploughed in by SoftBank Vision Fund, as
reported first by ET on April 15. The Competition Commission of India (CCI) had recently cleared SoftBank’s investment in Swiggy.

The massive investment round comes even as arch rival Zomato closed its initial public offer, which was
oversubscribed by more than 40 times last week. Zomato is expected to list on the Indian bourses in the next few days, becoming the first among a clutch of domestic unicorns—startups valued at $1 billion or more—to tap the public markets.

However, Zomato’s IPO and the overall narrative around pruning unit economics and other financial metrics for consumer internet startups which are going public, won’t alter Swiggy’s strategy, said the company cofounder & CEO
.

“We are going to go aggressive just not on discounting… but also on our own investments in non-food and food. That was the plan and that will be the plan,” Majety told ET on Tuesday adding that the company doesn’t have a concrete timeline to go public, for now. “Swiggy is going to remain private… Zomato’s listing doesn’t change the company’s strategy in any way.”

Terming Zomato’s IPO as “a good public market validation of the category,” Majety estimated that the next decade will be very important and his company will “need to make investments in grocery, even as food delivery has achieved better unit economics and is making progress.”

ET reported on July 6 about
renewed discounting by both players.

Swiggy Instamart, Supr Daily in focus

Majety said the food-delivery app will use the fresh capital to aggressively invest in non-food verticals along with exploring M&A opportunities and hiring tech talent.

The big focus for investments will be on its hyperlocal grocery and essentials delivery service Instamart, which is fully operational in Bengaluru and Gurugram and has been soft launched in Mumbai. The company also runs a separate
subscription-based platform SuprDaily, acquired in 2018, for morning delivery of essentials like milk and breads. In this category, Swiggy competes with the likes of BigBasket’s BB Daily besides recent entrants like Reliance’s JioMart which is piloting this service in select cities.

As much as 25% of Swiggy’s revenue now comes from non-food delivery businesses, which Majety sees growing further in the next five years.

ETtech

(Graphic: Rahul Awasthi/ETtech)

The latest financing round is significant with influential tech investor SoftBank coming on board. Importantly, this is the first large investor to back Swiggy after a gap of three years when Naspers first came on board. Japan’s SoftBank, led by Masayoshi Son, has been evaluating both Zomato and Swiggy for the last few years, as we have reported earlier (
Read ETtech Morning Dispatch dated April 16, where we wrote about why SoftBank picked Swiggy over Zomato).

“We’ve always viewed Swiggy, not as a food delivery company, but as a last mile convenience and logistics player with an unparalleled competitive advantage,” Sumer Juneja, partner, SoftBank Investment Advisers, told ET.

“Instamart, which is the largest category after food-delivery today across cities active for more than six to nine months, has unit economics that is tracking better than what food delivery was at the same scale,” Juneja said. The cost of acquiring fresh customers for the new delivery businesses will be far lower compared to what it was when Swiggy began as only a food-delivery app.

Also, hyperlocal services like Instamart and Supr Daily are building on the existing fleet for food-delivery, which makes the cost of servicing these users relatively lower.

SwiggyETtech

“It is still super early if you look at the grocery space overall… I think there will be a lot of investments going into it,” Majety said.

Swiggy, though, will focus on the urban market and not on value-based groceries or monthly stock up like BigBasket. ET reported in its July 19 edition that BigBasket, which is now owned by the Tata group, is
planning to bring back express deliveries–fulfilled typically within an hour– after years of experiments.

Others competing in this category include Grofers, which has
raised $120 million from Zomato and Tiger Global and Reliance Industries’ JioMart, which is upping the ante on its new commerce venture.

Food-delivery versus NRAI

In recent weeks, the National Restaurant Association of India (NRAI)
has filed a complaint with India’s anti-monopoly watchdog, alleging that food-delivery platforms Zomato and Swiggy charge exorbitant commissions forcing restaurants to give discounts. ET reported last week that Swiggy
was piloting a direct ordering product Swiggy Direct in a move which is seen as placating the restaurant industry. “We have always been talking with restaurant partners and will continue to talk to them on what the issues are and what we can do. We are committed to them and Swiggy Direct is a pilot in one such direction,” Majety said adding that the company had not received a formal notice from CCI on the NRAI complaint.

Swiggy Direct is among a bunch of initiatives being planned by the company. Majety said ideas like Order Direct were tried previously in 2014-15, but the acceptance among restaurants has increased over the last one year. “ We have thought about it in the past as well but we weren’t able to find the acceptance of these direct ordering solutions from the community. I guess, the importance of delivery itself has taken a huge leap in the last one year.” Restaurants are now going out to market themselves and getting more orders directly.

Swiggy’s large fund-raise has closed amid changes in its leadership team. Last month, the company
elevated Phani Kishan to the position of cofounder. This was in the backdrop of its chief operating officer Vivek Sunder announcing he’ll be
leaving Swiggy. Sunder had played a key role during Swiggy’s expansion into over 500 cities. “He ( Sunder) had a huge role in driving better unit economics that we have been able to achieve in the last 18-24 months. I’m going to be overseeing that role while we look for a replacement,” he said.

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