Restaurant discovery platform startup Zomato has made an offer to its business rival Swiggy of a possible merger as per a report by Samidha Sharma and Digbijay Mishra in The Times of India. Though their exact business profiles may not match each other, the recent takeover of logistics startup Runnr by Zomato has added some muscle to it and if these talks indeed lead to their logical conclusion, one can witness some serious consolidation in this space.
Zomato is based out of Gurugram and boasts of three million orders a month for delivery from the 25,000 odd restaurants it has on its books, including some in the UAE. The company, according to some reports, is on the verge of receiving a fresh round of funding from an Alibaba affiliate Ant Financial, though this has no connection with the other development of the talks with Swiggy. However, what is relevant is that Zomato may get a valuation of around $1 billion whereas Swiggy’s last known valuation is around $400 million.
In terms of numbers, Swiggy’s four million orders delivered each month does appear higher than Zomato’s; however, that’s how the market operates. For the record, restaurants that have signed up with Swiggy are around 18,000. Zomato is reportedly offering a 1:4 swap ratio to Swiggy, to which there is very little likelihood of Swiggy agreeing. Inside sources indicate that Swiggy considers itself to be a $500 million company by now.
On another level, talks are being held with both these Indian startups by Flipkart and Tencent, for a possible tie-up/investment. The talks with Zomato appear to have proceeded nowhere and both have turned to Swiggy. Besides these two, Alibaba and Paytm have also reportedly shown interest in Swiggy.
Unfortunately, the conditions are not so rosy for business for both Zomato and Swiggy. While the former has tried to bring down its losses and clocked a near double turnover in fiscal year 2017, compared to the previous year, the latter has posted a loss of Rs 137 crores on a revenue figure of just Rs 23.59 crores.
A merger might just be the prescription under the circumstances. But it may take some time before anything like that comes about.
However, Swiggy has denied any such development. "Swiggy has a razor-sharp focus in delivering a superior customer experience as we continue to grow as India’s largest food ordering and delivery company. We would not like to comment on baseless speculations such as this,” a Swiggy spokesperson said.