Food delivery giant Swiggy has attracted attention from e-commerce titan Amazon, expressing interest in a potential deal involving its quick commerce platform, Instamart.
Swiggy’s Public Offering Plans
According to a report the Swiggy has submitted a confidential draft document to Sebi for a public offering worth Rs 10,414 crore. This development has sparked Amazon’s interest in discussing a stake purchase or a buyout of Instamart, though several hurdles remain, as reported by sources familiar with the matter.
Amazon’s Strategic Move
The report quotes a source saying, “Amazon has shown interest in participating in the ongoing pre-IPO placement or acquiring Instamart outright.” However, no formal offer has been tabled yet. The source added that Amazon headquarters in Seattle may need to act swiftly to advance negotiations to the next level.
Strategic Considerations
Despite the potential deal, it’s unlikely that Swiggy will sell only its quick commerce division, and Amazon is reportedly less inclined towards the food delivery sector, which has seen growth plateau. Moreover, purchasing Swiggy in its entirety, valued between $10-12 billion, presents financial challenges for Amazon, known for avoiding minority stakes.
Market Dynamics
Swiggy, based in Bengaluru, is expected to price its IPO at a discount compared to its competitor Zomato, whose market cap was Rs 1.9 lakh crore as per recent BSE market data. According to a Goldman Sachs report cited in the publication, Blinkit and Zomato’s commerce units hold a combined value of Rs 1,08,741 crore.
Amazon’s Expansion Plans
Amazon’s interest in Swiggy aligns with its efforts to establish a quick commerce business in India. The company’s Indian team has been exploring initiatives in this sector, driving its interest in Instamart.
Financial Maneuvers by Swiggy
Ahead of its IPO, Swiggy has been divesting secondary stakes to reduce Prosus’s shareholding, its largest stakeholder holding approximately 33%. The company has also facilitated an Esop buyback worth Rs 543 crore, providing liquidity for its employees.
Previous Negotiations
Earlier, Flipkart had explored a similar deal with Swiggy, although no agreement materialized due to valuation disparities between the two companies. Swiggy has approached various entities including WhiteOak, Motilal Oswal, Orchid Asia, Malabar, Enam Group, and high-net-worth individuals for the sale of its secondary stakes.
This potential deal between Amazon and Swiggy marks a significant development in the competitive landscape of India’s e-commerce and quick commerce sectors.