Flipkart almost signed a big Swiggy deal

Flipkart almost signed a big Swiggy deal

Flipkart explored a potential stake purchase in Swiggy about eight to ten months ago as two of India’s largest consumer internet firms sought to ally amid disruption set off by the rise of quick commerce, investors aware of the matter said. Once the talks fizzled out due to a valuation mismatch, Swiggy filed a confidential draft application in April to list on the public markets, they added.

Also present at the negotiations was Prosus—the largest investor in Swiggy with a 33% stake—which was keen to divest some of its holding, the sources said.

“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 spokesperson for Swiggy denied the development.

“No such conversation/negotiation/discussion has ever taken place,” the spokesperson said in response to ET’s email query. Prosus and Flipkart did not respond to ET’s queries.

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The discussion to strike a strategic alliance between Flipkart and Swiggy, although unsuccessful, underscores the changing consumer preference in India’s ecommerce market— estimated at $133 billion in a report by Bernstein Research in March 2024.

Even as Swiggy’s quick commerce vertical—Instamart—faces increased rivalry from Zomato’s Blinkit and Zepto, ecommerce major Flipkart is expected to make significant investments as it launches its own quick commerce arm next month.

For context, Flipkart also engaged with Zepto but the deal didn’t fructify and the quick commerce startup closed a $665 million funding, last week, at more than double of its last valuation in 2023.

Strategic alliance

If Swiggy’s Instamart delivery vertical was a point of interest for Flipkart, having the country’s largest ecommerce firm on its side would have delivered strategic gains for the food delivery company.

Flipkart’s entry could have provided a partial exit to Swiggy’s largest investor, Prosus. More so, at a time when its listed rival Zomato was gaining market value owing to its leadership in food delivery as well as quick commerce business through Blinkit, sources noted.

Swiggy was last valued at $10.7 billion following its $700 million funding round in January 2022.

At the time of the discussion, Swiggy was valued at about $11 billion to $ 12 billion, which would have been lower than Zomato’s market capitalisation, people mentioned above said.

Currently, Zomato has a market capitalisation of over $20 billion aided by growth in quick commerce as well as profits in the previous quarters.

“The talks were centred around the Prosus block and if others too can join and make a big enough chunk as Flipkart was not interested in a minority stake,” another person aware said.

Prosus, the Dutch listed investment arm of South African conglomerate Naspers, has invested around $1 billion in the food and grocery delivery firm over the years. It has been trying to bring its holding in Swiggy to below 26% from the current 33%. This also means 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.

Swiggy, in April, filed for its draft IPO application with the market regulator Sebi confidentially. Before that, it secured shareholders’ approval for a Rs 10,400 crore ($1.25 billion) public issue–which will include Rs 3,750 crore ($450 million) of fresh shares and an offer for sale (OFS) of shares worth Rs 6,664 crore ($800 million) by existing shareholders.

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