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Swiggy completes $1.25 billion funding round, shifts focus to non-food businesses

In view of funds raised by the platform, Swiggy announced that it would now pursue initiatives like AI while also strengthening its core business. 

Online food delivery platform Swiggy closed its $1.25 billion round led by SoftBank Vision Fund 2 and its existing backer Prosus, a press release by the company confirmed. The news comes a week after the Competition Commission of India (CCI) approved SoftBank’s proposed investment in Swiggy, the fund’s first investment in the Indian food delivery segment.

“This latest fundraise was heavily oversubscribed following strong interest from investors, and comes on the back of Swiggy’s rapid recovery from the impacts of Covid-19 and subsequent growth in 2020-21,” the press release stated.

Why this matters? Swiggy and Zomato, the two dominant players in the online food delivery space in India, have both raised mammoth sums of money over the last few days. Swiggy – through its latest round of funding, and Zomato – through its initial public offering (IPO). The two platforms also face allegations by the National Restaurant Association of India (NRAI), which has asked CCI to investigate the companies for “inherently anti-competitive practices.” Will the recent funding further strengthen the two players’ hold over the food delivery market and deter competitors from emerging is an important question to consider.

In addition to food delivery, Swiggy is also engaged in instant grocery delivery service through Instamart and pick-up and drop service through Swiggy Genie.

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“Our biggest investments will be in our non-food businesses that have witnessed tremendous consumer love and growth in a short span, especially in the past 15 months of the pandemic,” – Swiggy CEO Sriharsha Majety.

More details on the latest round

Background: In April, when Swiggy raised $800 million, Business Standard reported that SoftBank’s Vision Fund 2 is also looking to invest $450-million in the food delivery platform in the same round, valuing the company at $5.5 billion. But SoftBank’s investment was pending CCI approval. This approval was given on July 12.

Participants: Accel Partners, Wellington Management, Qatar Investment Authority, Falcon Edge Capital, Amansa Capital, Goldman Sachs, Think Investments, and Carmignac participated in this round of funding along with Softbank and Prosus.

Where will the funding go? The investment will go into Swiggy’s core food delivery business as well as for “building new food and non-food adjacencies in 2021 and beyond,” the press release stated. “To support this, Swiggy will enhance its capabilities in technology and AI, and strengthen teams across Engineering, Product, Data Science and Analytics as well as in business and supply chain for its newer initiatives,” the press release added. Swiggy has “the railroads in place to empower multiple businesses to reach the new age consumer on a daily basis, and food delivery is just the beginning,” Sumer Juneja, SoftBank Investment Advisers, said.

Zomato’s IPO

Swiggy’s arch-rival Zomato’s Rs 9,375 crore ($1.25 billion) IPO, which opened between July 14 to July 16, was oversubscribed nearly forty times on the last day led by a strong response from qualified institutional investors and retail investors. The share allotment is likely to be finalised by July 22. The IPO also made Zomato the first online food aggregator from India to go public.

According to RedSeer, Zomato is the category leader in the food delivery space in India. The company had 169,802 active delivery partners and 148,384 active food delivery restaurants during the month of March 2021, Zomato’s red herring prospect (RHP) stated. Furthermore, India’s food services market is expected to grow to US$110 billion in 2025, the prospect added.

Zomato is also looking to acquire a 9.3 percent stake in online grocery delivery platform Grofers, giving competition to Swiggy’s grocery delivery service Instamart.

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NRAI Asks CCI To Look Into Anti-Competitive Practices By Zomato, Swiggy

“During the pandemic, the magnitude of anti-competitive practices of Zomato & Swiggy have increased manifold and despite numerous discussions with them, these deep-funded marketplace platforms are not interested to alleviate the concerns of the restaurants,” the NRAI stated in a press release.

The issues that NRAI has asked CCI to probe include:

  • Bundling of services
  • Data masking
  • Exorbitant commissions
  • Deep discounting
  • Price parity agreements
  • Violation of platform neutrality
  • Lack of transparency
  • Vertical integration
  • Exclusivity of listed restaurants

On July 12, NRAI filed additional information with CCI regarding the alleged anti-competitive practices. NRAI alleged that restaurants are threatened to get delisted if they offer better rates through other channels, forced to give discounts, charged exorbitant commissions, and given delayed payments.

Impact of proposed amendments to E-Commerce Rules

The government on June 21 proposed amendments that give the existing Consumer Protection (E-Commerce) Rules, 2020 more teeth.

The proposed rules cover food delivery platforms like Zomato and Swiggy and contain provisions that might impact the growth and future of these platforms. Among other things, the rules require these platforms to treat all sellers equally, to prevent the promotion of certain groups of sellers, to ban flash sales, to curb private labels, to explain the ranking process, and to stop using data to benefit their own products or a particular group of sellers.

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