Invesco has slashed the valuation of food aggregator Swiggy to $5.5 billion as of January 31, 2023. TechCrunch reported that this decision by the American investment management company comes as a significant blow to the food delivery company, which had been valued at $5.75 billion during its last funding round in April 2021.
Back then Swiggy co-founder and chief executive Sriharsha Majety informed the unicorn’s employees that the Bengaluru-based start-up had raised about $800 million from existing investors Prosus Ventures and Accel as well as new investors like Falcon Edge Capital, Goldman Sachs, Think Capital, Amansa Capital and Carmignac.
This status quo is a sharp reversal from 2018 when Swiggy received $1billion in funding from existing investors Naspers, DST Global, Meituan Dianping and Coatue Management. The startup's valuation stood at $3.3 billion, which is a massive jump from the $1.3 billion valuation in June 2018 when it raised $210 million. Just 4 months before this, the company raised another tranche of $100 million at a $700 million valuation.
This down-valuation is likely to have significant repercussions for the food aggregator business potential in India, making it difficult for Swiggy to raise funds in the future. It could also impact its ability to invest in expansion and other new initiatives. The company may also face increased scrutiny from investors and may need to demonstrate a clear path to profitability to attract new investors.
Swiggy, which was founded in 2014, has emerged as a leading player in the Indian food delivery market, providing doorstep delivery of food from restaurants to customers. However, in the past year, it has faced multiple business challenges, ranging from pandemic-related disruptions to regulatory hurdles.
The decision by Invesco to cut Swiggy's valuation is a reflection of the growing concerns around the profitability of food aggregator businesses in India. The high costs of customer acquisition and delivery logistics, combined with intense competition, have led to the erosion of profit margins for food delivery companies.
Apart from the valuation cut, Swiggy has also faced several other challenges in India in the past year. The COVID-19 pandemic led to a significant drop in demand for food delivery services, leading Swiggy to pivot to other businesses like grocery and medicine delivery. The company also faced regulatory hurdles in some states, where local authorities imposed restrictions on the commission fees charged by food aggregators.
As the food delivery market in India becomes increasingly competitive, Swiggy will need to find innovative ways to differentiate itself and demonstrate a clear path to profitability to investors.