New investors join food delivery bandwagon

Food delivery startups Swiggy and Zomato have roped in new investors amid a slump in business triggered by a lockdown, indicating that the food delivery war will only intensify in the months to come.

Swiggy has raised $43 million as part of its ongoing funding round from new investors ARK Impact, Korea Investment Partners, Samsung Ventures, and Mirae Asset Capital Markets, apart from existing backers Tencent. Zomato has bagged about $5 million from Pacific Horizon Investment Trust. This fund is managed by Baillie Gifford, which manages about $290 billion and had earlier invested in Flipkart and Ola.

The new round values Zomato at about $3.2 billion while Swiggy is valued at roughly $3.6 billion, according to people in the know.

“Swiggy has built a sustainable food delivery business over the years while solving various customer pain points. As we continue to strengthen and expand our services that offer unparalleled convenience to our customers, we are humbled by the faith shown by our investors year-on-year, and welcome the new investors on board,” said Rahul Bothra, chief financial officer at Swiggy, in a statement, “Our focus remains to execute on our vision while building a sustainable path to profitability.”

The latest tranche is a top-up to the $113 million Swiggy had raised in February from existing investors Prosus and Meituan-Dianping, among others. According to Crunchbase, Swiggy has raised about $1.6 billion while Zomato has snared about $900 million.

Both Swiggy and Zomato has diversified from a purely food delivery play. They have got into the business of cloud kitchens, apart from launching hyperlocal grocery delivery. While Swiggy has been at it for about a year now, Zomato forayed into grocery delivery earlier this week.

Zomato’s entry into groceries comes at a time when business at both these firms has been dealt a massive blow by the lockdown triggered by the Covid-19 outbreak. According to reports, both firms, in the past few weeks, have seen orders reduce to less than half of their normal volumes.

In such times, delivery of essentials seems like a timely move to make the most of their logistics fleet, given that both firms, locked in a land grab, have incurred hefty losses. Swiggy lost ₹2,363 crore on revenues of ₹1,128 crore in FY19. Zomato reported losses of ₹1,001 crore on revenues of ₹1,397 crore during the same period.