Flipkart considered buying a stake in Swiggy about eight to ten months ago, but the talks fizzled out due to a valuation mismatch, investors aware of the matter told the Economic Times.
Why were the talks initiated?
This was an effort for the two to unite amid the market disruption caused by quick commerce players such as Zepto and Blinkit, according to the Economic Times report.
Get ready to catch the final stages of the World Cup only on Crickit. Anytime, Anywhere. Explore now!
Swiggy, after the failed deal, filed a confidential draft application in April to list on the public markets, they added.
Also Read | Flipkart to compete with Blinkit, Zepto? Flipkart Minutes likely launch in July
The investors’ side of the story
Also present at the negotiations was Prosus, the largest investor in Swiggy with a 33% stake. Prosus was keen to sell some of its holdings, the sources said.
Prosus, the Dutch-listed investment arm of South African conglomerate Naspers, had invested around $1 billion ( ₹8,342.35 crore) in Swiggy. It has now been trying to bring its holding below 26% from the current 33%, according to the report.
This is because Prosus will be tagged as a ‘promoter’ during Swiggy’s IPO because under Indian rules, a shareholder with a stake of 26% or more is termed a promoter, which puts restrictions on the shares it could sell after the IPO, the report read.
“There was a discussion for majority stake for Flipkart where Prosus and other investors would offload stake but besides valuation (mismatch), a majority stake (demand) was also a hurdle,” the person mentioned above said, adding that “discussions were verbal and there was no formal binding or non-binding offer on paper.”
A Swiggy spokesperson denied this. “No such conversation/negotiation/discussion has ever taken place,” the spokesperson said in response to the Economic Times’ email query. Prosus and Flipkart did not respond to the Economic Times’ queries.
Also Read | Maggot in chicken biryani? Swiggy offers Hyderabad man ₹64 refund for ₹318 order
What does this imply?
The discussion to strike a strategic alliance between Flipkart and Swiggy, although unsuccessful, highlights the changing consumer preference in India’s ecommerce market, which is estimated to be worth $133 billion ( ₹11.09 lakh crore), according to a Bernstein Research report in March 2024.
If Swiggy’s quick commerce arm, Instamart was a point of interest for Flipkart, having the country’s largest ecommerce firm on its side would have delivered strategic gains for swiggy, according to the report.
Also Read | Zomato to not deliver your orders in plastic containers? Deepinder Goyal’s reply
The background
Even as Instamart faces increased rivalry from Zomato’s Blinkit and Zepto, Flipkart is expected to make significant investments as it launches its own quick commerce arm next month, according to the report.
Flipkart had also tried to make a deal with Zepto, but it didn’t fructify and the quick commerce startup closed a $665 million ( ₹5,547.66 crore) funding last week, at more than double of its last valuation in 2023.
Swiggy was last valued at $10.7 billion following its $700 million funding round in January 2022. In comparison, Zomato has a market capitalisation of over $20 billion.
Swiggy, in April, filed for its draft IPO (Initial public offering) application with the market regulator confidentially. Before that, it secured shareholders’ approval for a ₹10,400 crore ($1.25 billion) public issue–which will include ₹3,750 crore ($450 million) of fresh shares and an offer for sale (OFS) of shares worth ₹6,664 crore ($800 million) by existing shareholders.
