India Markets closed

Led by Swiggy, Zomato, Big Basket, food delivery firms corner big slice of funding pie


Online food delivery and grocery players have managed to get a fairly big slice of the funding pie in 2018-19, rustling up close to $2 billion. A big chunk of this, analysts say, would be used to create delivery infrastructure and acquire customers.

India s food delivery market is scaling up rapidly from a 15-million order run rate as of March 2018, the market has scaled up to approximately 65-million orders currently, higher than earlier expected, analysts at Kotak Institutional Equities (KIE) wrote in January.

The estimated monthly operating cash burn of food delivery firms is $32 million at an average commission of 15%. In general, e-commerce companies would need continued support from investors as their losses show no downward trend.
According to KIE, Swiggy s aggregate losses during FY15-18 were $113 million while those for Zomato were $146 million. BigBasket and Grofers losses for the period stood at $147 million and $74 million, respectively.

Despite this the space is seeing new entrants, some of whom are exploring different niches. While Amazon is operating in the online market with Amazon Pantry, Faasos, for instance, operates cloud kitchens, though both

Zomato and Swiggy are also setting up their own cloud kitchens to improve supply.
Sector watchers say the delivery segment is getting crowded with UberEats entering the fray in May 2017. Foodpanda, of course, has been around for many years now as has Grofers, which saw an infusion of $60 million in early March. Given that online companies have around 2% market share in the total food delivery market, the market has potential to grow.

Online delivery of food, fresh foods and groceries is being driven by changes in lifestyle and the rising penetration of smartphones. India has over 450 million of the 3 billion smartphones across the world currently, according to Boston Consulting Group. Morgan Stanley estimates India is adding one internet user every three seconds and forecasts that the e-commerce sector in India is estimated to reach $230 billion by 2028.

During 2018-19, Swiggy walked away with $1 billion in fresh funds from South African internet and media group Naspers and others, in a transaction that valued the food delivery business at an estimated $3.3 billion. Rival Zomato was able to attract $315 million; in February 2018, the food delivery platform had raised $200 million.

Online supermarket BigBasket has mopped up $150 million from existing backer Alibaba and new investors South Korea-based Mirae Asset and UK-based CDC Group, documents sourced from business signals platform on Thursday showed. In February 2018, the e-retailer had pulled in $300 million.
BigBasket s latest fundraise will mark the Bengaluru-based firm s entry into the unicorn club, valuing it at an estimated $2.28 billion.

Swiggy had also received funding to the tune of $210 million in June last year from Naspers, DST Global and others as rising smartphone penetration leads to increased internet consumption.

Online food delivery platform Zomato has raised a total of $105 million from investors led by Germany-based Delivery Hero SE and US-based Glade Brook Private Investors. The Gurgaon-based firm also mopped up an additional $172 million by selling its UAE food delivery business to Delivery Hero Group. In October last year, Ant Financial, an affiliate of the Alibaba group, had pumped in $210 million in the company.

Rebel foods that operates internet kitchen brand Faasos is raising about $16 million in fresh funding from existing backers Lightbox Ventures II, Lightbox Expansion Fund and Sequoia Capital India Trust. Founded in 2011, the Pune-based firm s strategy is to run multiple restaurants from the same cloud kitchen. It runs 1,100 internet restaurants in 15 cities across India.

In early March, online supermarket Grofers raised close to $60 million in funding led by SoftBank Vision Fund. Existing backers, US-based Tiger Global Management and venture capital firm Sequoia Capital also participated in the round that valued the firm at $424.84 million. The funding will come in handy for the firm which is aiming to take on FMCG (fast moving consumer goods) players through its own in-house brands of low-cost FMCG products