Chinese internet behemoth Tencent is teaming with other global investors to write a fat cheque for Swiggy, according to people familiar with the matter. This fat cheque may land the food delivery startup a handsome amount of $500-700 million at a valuation of around $2.5-3 billion.
If reports are to be believed, Tencent has already started discussion with Swiggy’s existing investors Naspers and Meituan Dianping. Other existing investors including US-based hedge fund Coatue Management and Russia’s DST Global are also expected to be part of the latest fundraising round.
The latest fundraising round may help few existing investors to make a profitable exit. However, names of these existing investors could not be ascertained.
Sources claim that the latest fundraising round may take place by end of December. It is worth nothing that Swiggy has already raised two fundraising rounds earlier this year. The startup’s last fundraising round in June had propelled it to the coveted unicorn club.
Separately, Swiggy and Zomato are believed to be currently locked in a fierce battle to woo SoftBank. Market is rife with rumors that both companies are chasing Japanese investment giant for investment. Although SoftBank has so far not given any signal about which company it may prefer, reports suggest that Zomato is more likely to clinch the deal.
High cash burn rate in food delivery industry
With competition heading northwards, Swiggy and Zomato are feeling the heat. Both companies are burning their cash at an incremental pace to gain maximum market share. Apart from technology upscale and talent acquisition, the two incumbent players are spending millions in cash back offers and discounts.
Besides, the revival of Foodpanda (after being acquired by Ola) and entry of UberEat has increased competitive pressure on Swiggy and Zomato.
Analysts argue that intense competition has left both companies with no option but to raise more funds. However, they will have to be equally cautiously about health of their balance sheet, analysts add.