The Recent Growth of Start-ups throughout India

Swiggy, which was founded in 2014, is an Indian-based start-up offering a delivery service called Instamart. The firm was the second-fastest Indian company to become a unicorn start-up, reaching a valuation of over 1 billion USD in just under four years in June 2018. This year, in January 2022, they reached a valuation of 10.7 billion USD in a 700 million USD funding round, nearly doubling their valuation just 6 months after being valued at 5.5 billion USD in a previous round in July 2021. The recent funding round included investors such as Invesco and the Qatar Investment Authority, to name a few.

Swiggy currently operates in over 500 Indian cities, completing over 1.5 million orders a day and are expected to generate 1 billion USD in the next three quarters. Furthermore, the funding raised is reportedly going to be used to scale the offerings and reach of their delivery service, with the market becoming increasingly competitive. Their co-founder and CEO, Sriharsha Majety, said that they aim to make Swiggy “the platform that 100 million customers can use 15 times a month”.

Swiggy and Zomato are the two firms that dominate the Indian food delivery market, which was valued at approximately 5 billion USD in 2020, but would have likely seen another year of sustained growth in 2021 due to the pandemic.  Zomato had an initial public offering in July 2021 which saw its valuation reach 12 billion USD, despite reportedly being one of the first companies to IPO in India without having turned a profit. They are aiming to transform the eating habits of a population where 90% of people do not go out to eat at restaurants, with analysts at Bernstein expecting Zomato to have around 50 million monthly transacting users by 2025, up from 10 million in 2020. Other firms competing in this industry include the SoftBank backed BlinkIt which has raised nearly 800 million USD, as well as Zepto which has raised 160 million USD.

BlinkIt and Zepto are able to compete with these bigger firms by offering a faster delivery service than their competitors, who can only offer deliveries in a matter of hours or sometimes days. They operate in a similar way to European counterparts such as Getir and Gorillas which compete with established brands such as Deliveroo and Uber Eats through offering a faster service. However, worker conditions in this gig economy are controversial, with drivers being pushed to meet the short delivery times and often feeling pressure to speed in order to meet these deadlines.

In addition, big multinational firms have started investing in this industry. In 2020, Amazon launched Amazon Food in Bangalore which supplies food from 2,500 restaurants, and in 2021, Google invested into Dunzo, another delivery app, through their Series E funding round. However, other firms such as Uber Eats have left the industry, with their Uber Eats – India division being acquired by Zomato in January 2020, in exchange for around a 9% stake in Zomato.

Outside of the delivery service industry, another start-up, Paytm, had its initial public offering in November 2021, aiming to raise 2.5 billion USD at a valuation of about 20 billion USD. However, the stock performed incredibly poorly with the share price down 40% after two days of trading. This is thought to not be a result of the company’s fundamentals but because the founder wanted to make Paytm the largest IPO in India.

Additionally, the e-scooter maker, Ola Electric, recently raised 200 million USD at a valuation of 5 billion USD. The funds are expected to be used for further expansion, with the firm already building what will be the world’s largest two-wheeler manufacturing facility as it plans to expand its annual manufacturing capacity to 10 million electric scooters. India is currently the largest consumer of scooters in the world, with over 15 million bought in 2021, a decline from the high of over 21 million in 2019.

Similar to throughout Latin America, India appears to be full of start-ups, many of which offer online services and have experienced several years of rapid growth throughout the pandemic, which saw an uptake in the use of online services as people were encouraged to stay at home. The e-commerce market in India is forecast to see sales of 120.1 billion USD by 2025, with a growth rate of 18%, so there will certainly be room for Swiggy, their competitors and other firms in the industry to grow.

Analyst: Kristian Eklund

Sector Head: Gregor MacDonald

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