After Exploring Funding Deal with Swiggy, SoftBank Now in Talks to Invest in Zomato

After exploring a possible funding of up to $200-250 million in Bengaluru-based Swiggy, SoftBank has now held a discussion with Zomato to invest about $200-400 million. 

The Masayoshi Son-led investment firm, which has backed Flipkart and also Paytm, wants to finalise a deal either in Swiggy or Zomato to place its bet in the food delivery market. SoftBank is also the largest shareholder in cab hailing applications Ola and Uber, both of which acquired and launched food delivery services last year, respectively. 

According to estimates from RedSeer Consulting, India as a market holds tremendous potential for food-tech, the sector recorded a 125% increase in order volumes to 4.5 lakh orders per day from about 2 lakh orders per day in 2016. The major players who have been in the industry are Zomato and Swiggy.

The Deepinder Goyal-led Zomato had raised $200 million from Alibaba three months back which valued the company at about $1.1 billion. Zomato which currently operates in 24 countries, has recorded about 45 per cent increase in revenue in FY18 to $74 million. The company also has hit 5.5 million monthly delivery mark in March.

Meanwhile, Swiggy is in advanced talks with DST Global and New York-based hedge fund Coatue Management to raise over $100 million round which will see the startup’s valuation cross the $1-billion threshold. Swiggy was last valued at $700 million after its $100-million funding in February, mostly from South African media company Naspers Ltd. Swiggy leads the online ordering space at about 8 million monthly orders. Bundl Technologies owned Swiggy’s revenue rose six-fold to Rs 133 crore in the year ended March 2017, according to the company’s filings with the Registrar of Companies. Its loss, however, widened to Rs 205 crore from Rs 137 crore a year ago.

The development comes as SoftBank Chief Masayoshi Son has recently confirmed that the Japanese conglomerate has arrived at an agreement to sell its 20% stake in Indian ecommerce major Flipkart to US retail giant Walmart; the latter acquired the country’s biggest online player in worth $16 billion.

Zomato also had explored a merger with its biggest domestic rival Swiggy but talks felt apart, last November.

After invested over $6B in Indian companies like Flipkart ($2.5B), Paytm ($1.4B), Ola ($2B) & OYO ($250M) with in the past 1 year, Softbank also has held early discussions to invest more in Paytm Mall and is also eyeing to fuel PolicyBazaar with nearly $200M (Rs 1300 Cr).

On Tuesday, SoftBank chief Masayoshi Son has announced his plans to launch a second Vision Fund which would be set up in the near future, with funds from investors in the first fund or from institutional investors.