Swiggy Vs Zomato: Who Has A Better Chance To Win India’s Hunger Games?   

The two restaurant search and ordering startups gulped nearly $2 billion of investor money this year.
Illstration of a food delivery boy (Source: BloombergQuint)
Illstration of a food delivery boy (Source: BloombergQuint)

Investors have placed bigger bets on Swiggy as it vies with older peer Zomato to deliver piping hot food to hungry customers.

The two restaurant search and ordering startups gulped nearly $2 billion of investor money this year. Swiggy got more than half of it. It raised nearly $1 billion from a clutch of investors this week, making it the largest online food venture in India valued at $3.3 billion, according to people familiar with the matter.

This has been the best year yet for India’s food search and ordering startups. Swiggy and Zomato raised three times the funds food delivery ventures received in the last four years, according to data shared by Venture Intelligence. Investor optimism comes after two years of consolidation when several delivery ventures either shut down or were acquired. The market, according to Redseer, is expected to nearly quadruple to $2.5 billion by 2021. And it’s only expected to boom as cheap data encourages online ordering.

“The food-tech industry today is more about who is able to attract most money and investors, and then about services or innovation,” said Harminder Sahani of retail consultancy Wazir Advisors. “There is not much difference in any of the players.”

Zomato, which counts Ant Financial, Sequoia Capital and Temasek among its investors, has raised $610 million in all since inception in 2008, according to data cited by Crunchbase which aggregates information on startups. Swiggy, founded six years later, has already surpassed it, raising $1.5 billion in all from investors including Naspers, China’s Tencent and Meituan Dianping, out of which nearly $240 million was part of the secondary sale.

Swiggy’s latest funding builds pressure on Zomato to raise more money, Satish Meena, New Delhi-based analyst at Forrester Research, said over the phone. The investors who back Zomato won’t let Swiggy to win the battle via capital, he said.

Both the startups have yet to respond to BloombergQuint's emailed queries.

Swiggy is the largest such platform by orders. Indians place about 55 million food orders through apps every month, according to Meena. Swiggy contributed 25 million, followed by Zomato’s 19 million. Ola’s Foodpanda and Uber Eats together account for 5 million orders a month, Meena said.

Forrester Research estimates monthly orders to touch 100 million by next year, suggesting investors will pour more money to help food delivery startups grow.

No Profits Yet

The investments come when both Zomato and Swiggy continue to report losses. Zomato, however, has fared better on that count. Its losses narrowed to Rs 106 crore in the year ended March compared with Rs 390 crore the year earlier, according to its filings with the Registrar of Companies.

For Swiggy, the losses nearly doubled to Rs 397 crore during the period.

What’s working for Zomato is subscription services and advertisements. Founder Deepinder Goyal, in a blog post earlier this year, said the company has brought down the overall burn rate from $15 million in 2016-17 to $11 million in 2017-18. And the advertisement business is also growing 20 percent year-on-year.

Revenues of both the startups are similar as Swiggy has almost caught up with its older peer. Swiggy's sales jumped more than threefold over the previous financial year to Rs 442 crore in FY18. For Zomato, they rose 40 percent during the period to Rs 466 crore.

While food ordering platforms have started charging a delivery fee, they are nowhere close to turning profitable. Discounting continues to go up with cost of delivering food and that’s a concern, said Meena. “They will have to keep on burning more to keep their edge.”

Swiggy needs to figure out a way to monetise its business better, said Meena. Zomato, which has built a advertising-based monetisation model, has to work on to how to make money through deliveries and cloud kitchen.

Still, Swiggy’s war chest allows it to dabble into multiple things and models. “It doesn’t look monetisation is on their mind right now,” Meena said. Swiggy has technology and execution advantage over Zomato, he said.

For Sahani, cash matters more in this battle. The player who runs out of money first will be the deciding factor, he said.

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