Gurgaon-based food delivery provider Zomato is in talks with its rival Swiggy for a potential merger, according to a report by one of the dailies. However, the proposal from Zomato, may not end in a merger as both the players are unlikely to agree on the terms of the transaction, the newspaper reported citing sources. According to the report, a source said, “Zomato had offered a 1:4 share swap ratio to Swiggy, which isn’t likely to be agreed upon by its shareholders. Swiggy is looking for a $500-million valuation (up from its previous round), while Zomato wants to strike the deal valuing itself at more than $1 billion.”
The internet space in India is rife with rivals approaching each other for a merger, the prominent one’s being Ola’s acquisition of TaxiForSure in 2015 and online travel firm MakeMyTrip’s merger with Ibibo in 2016. There have been cases of failed deals too, the latest being the deal between Snapdeal and Flipkart, which fell through as Snapdeal wanted pursue an ‘independent path’, in August this year.
Zomato has established itself in the restaurant discovery space in India but faces stiff competition from Swiggy in the food ordering business. While Swiggy completes around 4-4.5 million orders a month, Zomato is doing 3-3.2 million orders and has a higher average transaction value, said an economic times report quoting industry sources.
Zomato is currently closing a financial deal, and looks to raise up to $200-million from Ant Financial. According to the report, this may further jack up Zomato’s valuation. Meanwhile, Swiggy had raised $80 million from Naspers, a South Africa-based internet and media conglomerate earlier this year, valuing it at $400 million. Notably, Zomato and Swiggy are the two largest players in the online food ordering industry, and a potential merger would be among the most significant moves made towards consolidating a financially stressed space.