Baron Capital cuts Swiggy's valuation for second time in 3 months

Baron Capital, a top investor in Swiggy, has marked down the value of its holding in the food delivery firm by 10%—the second such move in three months.

The US fund valued Swiggy at $45.76 million as of March 31, 2023, according to filings with the US Securities and Exchange Commission (SEC). The cost of the investment in the period was $76.78 million.

Baron Capital's investment in the food delivery firm was part of Swiggy's $700 million funding round in January 2022. It holds close to a 0.75% stake in the company through Baron Emerging Markets Fund.

The fund first devalued its investment in the Zomato rival by 34% to $50.9 million earlier in May. A week prior, Invesco, one of Swiggy's biggest investors, marked down the company's valuation to $5.5 billion. It also cut the valuation of its holding in Swiggy to $8 billion from $10.7 billion last year, as per its regulatory filings. Moneycontrol was the first to report on the development.

The development signals a tricky period for the food delivery firm as it navigates growing competition and prepares for a public listing by the year-end.

The drop in valuation also mirrors a cautious sentiment amid tough macroeconomic conditions. Volatility in rival Zomato's stock price has given rise to apprehensions about its business, notably in light of the economic downturn and its associated decline in consumer confidence.

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Recently, BlackRock—one of BYJU'S top investors—also slashed the valuation of its holding in the edtech firm by half to nearly $11.5 billion. Earlier this month, YourStory reported that US fund Neuberger Berman took a haircut in the valuations of its holding in healthtech firm Pharmeasy and fintech firm Pine Labs.

(A haircut in valuation is the difference between the current market valuation and how much an investor will recognise the investment as collateral.)

In FY22, Swiggy reported a widening loss, even as its revenue rose two-fold. The company recorded a loss of Rs 3,629 crore in FY22 versus a loss of Rs 1,617 crore in the previous financial year. Expenses shot up to Rs 9,574 crore from Rs 4,139 crore last fiscal, led by an increase in the cost of product procurement and advertising expenses.

However, Swiggy's CEO Sriharsha Majety announced that the food delivery business turned profitable in March for the first time since the company's launch in 2014. Swiggy will now focus on Tier II and III markets, he added.

The company earned a revenue of Rs 5,705 crore in FY22, up from Rs 2,457 crore in FY21. Prosus—one of Swiggy's biggest investors—said last year that the gross merchandise value (GMV) of Swiggy's food delivery arm grew 40% in the January-July period this year.