Swiggy and Amazon Are Negotiating an ECommerce Partnership on Instamart

Nitin Konde, Apoorva Bajj

Jul 23, 2024 — 2 min read

Swiggy and Amazon Are Negotiating an ECommerce Partnership on Instamart

In a possible deal involving its rapid commerce division under Instamart, Amazon India has reportedly approached Swiggy, which is preparing for an IPO, according to three people familiar with the situation. This news follows closely on the back of Swiggy's secretly submitting draft documents with Sebi for an initial public offering (IPO) of INR 10,414 crore ($1.25 billion), one of the biggest for a modern digital company.

According to one of the sources mentioned earlier, "Amazon has swooped in with interest to either pick up a stake in the ongoing pre-IPO placement or a buyout proposal for Instamart... but there are multiple roadblocks at the moment."

According to reports, there is currently no formal offer in place, and for the talks to progress further, the Seattle headquarters of Amazon will need to act quickly. According to these sources, the current offer structure is so complex that the preliminary conversations may not result in a transaction.

How Swiggy Is Placing Its Pricing Cards for This Deal?

Zomato, Swiggy's main competitor, has a market valuation of about INR 1.9 lakh crore, therefore the former is probably going to undercut its rival by a significant margin. The fast food delivery services Swiggy and Zomato do not have their valuation. But in April, Goldman Sachs estimated that Zomato's rapid commerce unit, Blinkit, was worth $13 billion.

The US eCommerce giant's Indian division has reportedly been developing its rapid commerce program for months, which may explain why Amazon is interested in Swiggy's Instamart. Since Amazon does not provide this service in any of its worldwide markets, they stated that launching a distinct sector for fast deliveries would necessitate global clearance.

To lower its shareholding of longtime backer Prosus, Swiggy has been selling secondary holdings in the private market for about $9 billion. This tech investor, who is South African and Dutch, now has 33% of the company and is reducing its holdings to less than 26% to avoid being considered a promoter when Swiggy goes public. Additionally, last week, the meal delivery service announced a $65 million ESOP buyback, providing liquidity to workers.

Why Similar Deals With Other Companies Didn’t Go Through?

It has been reported by several different media outlets that Flipkart attempted to get into a similar agreement with Swiggy; but, due to a mismatch in valuation between the two companies, no announcement was made. Swiggy had approached high-net-worth people and businesses such as WhiteOak, Motilal Oswal, Orchid Asia, Malabar, and Enam Group to sell its secondary stakes.

Business research firms 1Lattice and Datum Intelligence believe that the value of India's eCommerce business increased by 18-20% in the first half of 2024, with food sales increasing by more than 38% due mostly to a dramatic surge in fast commerce. Quick commerce currently accounts for over 40% of all online grocery sales. Most notably, the top three saw a 230% increase in category growth from 2021 to 2023.