In a move that could shake up the online food delivery ecosystem in India, Swiggy and Zomato have been conducting backstage talk to figure out the modalities of a merger. The two Indian unicorns are looking for cooperation after the cut-throat competition in the online food delivery system prompted them to burn billions in drawing volume and gain market share.
According to a Firstpost report, major investors of the two companies have been deliberating on the issue for the past few weeks. However, the talks are still in the preliminary stage. A person privy to the discussion said, "A potential merger is clearly a proposal that interests everyone. There are no timelines yet."
Key investors of Zomato include Sequoia Capital, InfoEdge, Temasek Holdings, Ant Financial, Vy Capital, Info Edge. Bessemer Venture Partners, Norwest Venture Partners, Accel and SAIF Partners have also invested in Swiggy.
Amazon's venture in the online food delivery business
Notably, the development has come after Amazon's reported expansion into the online food delivery business, along with Uber eats eyeing for an aggressive expansion across the country. One of the major advantages that Amazon has over its rivals is its already existing workforce in the country that can be utilized, along with hiring more delivery partners to beat the competition. The proposed merger could draw attention from the Competition Commission of India (CCI) as the merged entity would control the major part of the online food delivery business.
Interestingly, as reported by the financial daily the Economic Times in 2017, the two companies were then planning to merge. But the talks failed due to disagreement over business alignment and expected valuation. Zomato had proposed a stock-based merger, which Swiggy did not agree to as the Bengaluru based company was looking for acquiring and operating the food delivery business of its rival.
However, between all these speculations, in a statement to news agency IANS, Deepinder Goyal-led Zomato denied any talks of a merger with its rival Swiggy. "We have a tremendous focus on our business metrics and have seen great success in our goal towards profitability. We are not in talks with Swiggy for a merger or acquisition," the statement read. On the other hand, Swiggy is yet to make a public statement on the issue.