Leading food ordering and delivery start-up Swiggy is in the last stages of finalising a $900 million Series H round from a consortium of investors led by Naspers Ltd, which is expected to value Swiggy at $2.5-3 billion. The latest buzz is that the round will include an estimated $300 million worth of secondary share sales by some key backers. However, this is likely to be made at a discount to the valuation being negotiated for the primary investment.
People familiar with the negotiations told The Economic Times that Bessemer Venture Partners, Norwest Venture Partners, Accel and SAIF Partners are expected to sell a part of their stakes in the four-year-old company. According to data sourced from Tracxn, a startup research platform, these four investors collectively own about 39% of Swiggy. On the other hand, Swiggy's earliest investors, RB Investments and Harmony Partners, will reportedly exit completely, selling their cumulative 3% stake. If things go to plan, this will be one of the largest liquidity events for growth-stage investors in India's startup ecosystem.
The sources added that Norwest, which has invested about $20 million in the Bangalore-based startup since 2015, is expected to rake in $80 million through the partial stake sale. Meanwhile, South Africa's Naspers, the largest shareholder in Swiggy with a 23.3% stake, may see its holding increase to about 40% by investing over half the corpus through a mix of primary and secondary share purchases. We-Chat owner Tencent, in which Naspers holds a 31% stake, is expected to invest $50-100 million.
In addition, Swiggy's existing investors China's Meituan Dianping, US-based hedge fund Coatue Management and DST Global are also expected to participate in this funding round. The plan initially was to raise up to $500 million. But given the unprecedented interest it is receiving from global investors and the increasing competition in the food tech space - which posted a 15% quarterly growth in the number of daily orders through 2017 -Swiggy started thinking bigger.
If the investment round concludes by end-December, it will be Swiggy's third fund raise this year. The last round was in late June when it had raised $210 million and entered the coveted unicorn club with a valuation of $1.3 billion. In total, the company has raised $465 million so far.
Naspers Ventures CEO Larry Illg previously told the daily that market leader Swiggy was 36% larger than its closest competitor in terms of order numbers and that it boasted a higher average order value that placed it 64% ahead of competition in terms of gross merchandise volume - a proxy for gross sales. The company reportedly ended October with about 22 million orders in absolute terms.
Significantly, the size and timing of the planned secondary share sale marks a significant shift in India's startup ecosystem, where growth-stage investors typically had to wait for long periods to garner sizeable exits. For instance, Flipkart and Ola saw their first major liquidity events only after seven to eight years, in 2014 and 2018, respectively. Swiggy aims to pull it off in four years.