SoftBank, a Japanese conglomerate’s Vision Fund II, SVF2, has sought approval from the CCI, Competition Commission of India, to invest in food delivery company Swiggy (1).
The Masayoshi Son-led investment firm has made aggressive bets in India in 2021. It is now looking to invest in a food delivery unicorn, its first bet in the Indian food-tech space.
Earlier, Swiggy had secured close to 158 million USD as part of its series I round in April 2020, which saw participation from Tencent, Prosus NV, Ark Impact, Meituan Dianping, Korea Investment Partners, and others.
In April, Swiggy had secured over 343 million USD as a part of its Series J funding round via a slew of investors. It is part of the 800 million USD funding round, which would value the startup close to 5 billion USD (2).
Reportedly, there are reports that SoftBank Group Corp. is in talks to invest 450 million USD in the food delivery company at a 5.5 billion USD valuation.
SVF2 has offered a competitive assessment of its online ads and digital payment businesses as per the CCI document.
The investment firm stated in the document, “the activities of the parties don’t exhibit overlaps in India’s any plausible relevant market in India. Hence, the proposed combination won’t lead to any change in the competitive landscape. Nor will it cause any appreciable adverse effect on India’s competition.”
Notably, a CCI nod is necessary for the deal as SoftBank has investments worldwide in companies in the same space and Grofers, which competes with Swiggy’s Instamart, on-demand grocery delivery sector.
SoftBank’s interest in India’s food-tech space is not new. There have been speculations for years whether it will back Zomato or Swiggy. Zomato appeared to have an edge a few years ago after purchasing UberEat, which gave Uber, SoftBank’s portfolio company, a stake in the merged company.
Additionally, Alibaba’s Ant Financial, another early bet of Masayoshi Son, is also a backer of Zomato.
It is also interesting to highlight that Sumer Juneja, who leads investments for SoftBank India at present, used to be on Swiggy’s board a few years back when he was with Norwest Venture Partners, one of Swiggy’s early backers.
SoftBank’s bet on Swiggy also came when it witnessed a huge success in global investments like DoorDash. Its 680million investment in DoorDash was worth over 11.5 billion USD when it went public in December 2020 (3).
The Rivalry in Indian Foodtech Market
The new investments came amid Zomato raising 910 million USD in recent months as it prepares for an IPO this year. The last funding round valued Zomato at 5.4 billion USD. And during Zomato’s fundraise, the company stated that it is securing money to partially fighting off “any price wars or mischief from competition in several areas of business.”
A third player, Amazon, had also entered the Indian food delivery market last year. However, its operations are still limited to some parts of Bangalore.
Nonetheless, according to analysts at Bernstein, the Indian food delivery market will be worth over 12 billion USD by 2022.
After securing 800 million USD, Sriharsha Majety, Swiggy CEO and Co-founder, told employees in a memo that the new funds give the company a lot more firepower than the planned investments for their current business lines. Considering our unfretted ambition, however, we will keep experimenting with new offerings for the future that may need investment later. We will need to relentlessly invest and execute in the future to create an enduring iconic firm out of India.
He further added that the long-term goal for the company is to serve 500 million users in the upcoming 10 to 15 years, hinting at Meituan, a Chinese food giant, which had over 500 million transacting users last year, currently valued at over 100 billion USD (4).
“We are coming out of a difficult phase during the previous year considering the pandemic and have weathered the storm. However, everything we do from here on requires us to maximize the chances of our success in the long-term,” said Majety.
While Zomato is centered on the food delivery space, Swiggy is also betting big on its Swiggy Genie, a hyperlocal delivery service, which competes with Flipkart, Dunzo, and Amazon. It also offers Swiggy Instamart against players like BigBasket, JioMart, Amazon, Flipkart, and Grofers. While Swiggy Genie is active across 65 cities, its grocery delivery started with Bengaluru and Gurgaon.
Swiggy, which considers Prosus Ventures among its most prominent investors, laid out some staff last year, as did Zomato. It also scaled down its cloud kitchen efforts as an attempt to stay afloat during the coronavirus pandemic, which had prompted India to enforce a nationwide lockdown (5).
Swiggy’s performance this year, per Prosus Ventures. pic.twitter.com/AqcKYQ8ml1
— Manish Singh (@refsrc) December 23, 2020
SoftBank Vision Fund 2 also invested in Zeta, a banking tech startup at over 1 billion USD valuation (6). The investment firm, which has also poured capital in Flipkart, Ola, and Oyo, also backed Meesho, a social commerce platform, earlier this year (7). According to reports, OfBusiness, a Gurugram-based B2B marketplace, is in talks with SoftBank to secure 100 to 150 million USD at a 1.2 billion USD valuation, making it India’s latest unicorn.
Meanwhile, Paytm, India’s digital payments giant is getting its wheels rolling for its IPO, scheduled for November this year. SoftBank is likely to capitalize approximately three to five percent of its shareholdings in the company.