Amazon India is in discussions with Swiggy for a potential deal involving its quick commerce business, Instamart, according to a report by The Economic Times.
This development comes after Swiggy’s confidential filing of draft documents with SEBI for a public offering worth Rs 10,414 crore ($1.25 billion), which is expected to be one of the largest IPOs for a modern internet company.
As per the sources quoted in the report, Amazon has expressed interest in either acquiring a stake in Swiggy during its ongoing pre-IPO placement or proposing a buyout for Instamart. However, currently, several challenges are blocking this potential deal.
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The ET report indicates that early discussions suggest the transaction faces significant challenges due to its complexity. Swiggy is reportedly unwilling to sell only its quick commerce business, while Amazon is not interested in the food delivery sector.
Additionally, Amazon’s usual practice of avoiding minority stakes and the high valuation of $10-12 billion makes the deal particularly expensive for the e-commerce giant.
Bengaluru-based Swiggy is expected to price itself significantly lower than its main competitor, Zomato, which had a market cap of Rs 1.9 lakh crore as on Friday (19 July, 2024).
However, there’s no separate valuation for the quick commerce segments of Swiggy and Zomato, a Goldman Sachs report from April valued Blinkit, Zomato’s quick commerce unit, at $13 billion.
The report highlights that Amazon’s India team has been working on developing its own quick commerce service for several months. However, launching a separate vertical would require global approval since this service is not available in any other markets worldwide.
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Additionally, an earlier report by ET mentioned that Flipkart attempted a similar deal with Swiggy last year, but discussions fell through due to a valuation disagreement.
Meanwhile, Swiggy is selling secondary stakes, currently valued at around $9 billion, to reduce the shareholding of its long-time investor, Prosus, which aims to lower its stake from 33% to below 26% to avoid being classified as a promoter when Swiggy goes public.
Additionally, Swiggy announced a $65 million buyback of employee stock options to allow its staff to sell their shares.
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