Now China's Tencent too wants a bite in Swiggy

Chinese internet giant Tencent has joined a queue of global investors eyeing shares in India’s online food ordering and delivery giant Swiggy.

Tencent is willing to invest a significant portion of $500-700 million in funds for the food delivery platform, reported The Economic Times quoting people aware of the development. The investment could value Swiggy at $2.5-3 billion, two of the sources told the paper.

In August, Swiggy had initiated talks with news as well as existing investors to raise up to $500 million, with the valuation coming  out at $2.2-2.5 billion. In July, the firm had received at least one term-sheet with an estimated valuation of $2.5 billion, the report said.

Also read — Exclusive | Swiggy acquires on-demand delivery startup Scootsy

Global investors, including its existing backers such as Naspers,  China’s Meituan Dianping, US-based hedge fund Coatue Management and Russia’s DST Global, are expected to participate in Swiggy’s latest fundraising. Other suitors include growth equity firm General Atlantic and Chinese hedge funds Tybourne Capital and Hillhouse Capital.

The investors have been discussing the investment size and valuation of the company in the last three weeks, one person aware of the negotiations told the paper.

“The funding size under discussion is around $650 million, with Naspers looking to invest $200-250 million,” the person said.

“However, talks are yet to take definite shape and will take another 3-4 weeks to crystallise.”

Swiggy has been also in talks with Japan’s SoftBank for a sizeable investment since November. It is, however, not clear whether the latter will participate in the Swiggy’s upcoming fundraising round or opt to invest independently later.

While Swiggy, Naspers, Meituan Dianping and DST Global did not respond to queries from The Economic Times,  SoftBank, Tencent and Coatue Management declined to comment on what they termed as “market speculation.”

In the upcoming investment, Swiggy’s early investors could sell some of their shares in the company, the people mentioned above said.

So far, the firm has raised $310 million in 2018 with its previous fundraising in June catapulting it to the unicorn club with a valuation of $1.3 billion.

The third talk of raising funds in 2018 comes at a time when Swiggy has seen its monthly cash-burn jumping to $18 million to take on its rival Zomato, which spends over $20 million a month on discounts and cash backs to bump up order volumes.

Ant Financial-backed Zomato has been also looking to raise capital at frequent intervals as monthly cash-burn rates for these two aggregators have grown by over five times between April and July.

Experts say the capital rush is put to habit formation exercise, whereby, people get used to ordering food online.

“Both Zomato and Swiggy are creating new habits on online ordering, especially in tier 2 cities and beyond. Inducing such behaviour obviously comes at an extremely high customer acquisition cost (CAC),” Rahul Singh, president of National Restaurant Association of India told the paper.