Swiggy is keeping $700 million for its Instamart service, as investors’ interest is enhanced and growing competition in the instant grocery delivery segment. Instamart was launched in August last year as Swiggy’s quick commerce vertical and is all set to reach an annualized GMV run rate of $1 billion in the next three quarters.
Gross merchandise value, or GMV, is a key online retailing metric for the total value of merchandise sold through a marketplace.
However, Swiggy’s cofounder and chief executive, Sriharsha Majety, said that there is no set time frame for the deployment of the cash as it is an overall commitment to the category.
The delivery platform, which competes with Zomato-backed Grofers, Mumbai-based Zepto and Tata’s BigBasket in the quick commerce category, is clocking more than one million grocery orders per week and runs 150 dark stores across 18 cities. It will add 100 more of these so-called dark stores over the next few months.
Grofers, which is likely to receive $500 million in capital from NSE (-0.50%), operates a network of 200 dark stores to which it plans to add another 100, the company announced in a blog post in November. Zepto, a pure-play quick commerce platform that recently raised $60 million, is targeting 100 dark stores by year’s end.
Swiggy’s large capital commitment for Instamart comes on the back of the Bengaluru-based company’s holding talks to close a $600-700 million funding round led by US asset manager Invesco, ET reported first on Sept. 28. The fundraising, which is likely to give the firm a valuation of over $10 billion, is part of a re-rating exercise that will double the company’s valuation post rival Zomato’s bumper IPO.
Instamart, which aims to deliver groceries in 15–30 minutes through a network of seller-owned dark stores that it operates, emerged from the learnings of Swiggy Stores, a hyperlocal delivery marketplace for groceries and other essentials that shut earlier this year. What has morphed into Instamart began as an experiment a couple of years ago and is now the second-highest revenue driver for food delivery platforms.
Even as Swiggy pushed ahead aggressively on the grocery delivery front, the ET-tech company’s food-delivery business hit a $3 billion annualised GMV run rate, a lifetime high for the category, Majety announced. He said the company’s food delivery volumes have surpassed pre-pandemic levels, without getting into the specifics.
“The food delivery platform is the mothership that drives every other new business that we run, and we are very focused on that. I spend the majority of my focus on food delivery,” Majety said,” when asked if Swiggy’s focus had moved away from its core business. “The growth has been very strong for the category overall as the monthly transacting user spends are 50% higher than what they were compared to pre-Covid-19 levels.”
Swiggy is also running pilots for multiple services it classifies as “horizon three” that are in an experimental stage. Among them is a pickup and delivery service under Genie, a meat marketplace, and a separate subscription-based platform, SuprDaily, which it acquired in 2018. Swiggy’s newly elevated cofounder, Phani Kishan, is overseeing that business.