Invesco, which led Swiggy’s previous round, has downgraded the Indian food delivery giant’s valuation of its stake to about $5.5 billion, according to a filing.
This revised valuation, as of January 31, 2023, represents a striking 48.6% drop from the $10.7 billion valuation Invesco previously attributed to the startup in a funding round the Atlanta-headquartered company led last year .
This is the second time in recent quarters that Invesco has substantially changed Swiggy’s valuation. In October, Invesco had already downgraded its stake in Swiggy to $8 billion.
This updated valuation now puts Swiggy, which also counts Prosus Ventures, Accel and SoftBank among its lenders, in line with its main publicly traded competitor, Zomato, which at one point had a market cap of more than $13 billion. However, Zomato’s market cap has since taken a downturn, closing Monday’s trading session at around $6.78 billion.
It’s downgrading season for startups worldwide.
BlackRock recently cut the valuation of Byju’s, India’s most valuable $22 billion startup, by nearly half to $11.5 billion. However, Fidelity, another giant US investor, has largely kept its stakes in Indian startups Meesho and Pine Labs unchanged, according to an analysis of its recent filings.
The recent valuation cuts provide a new perspective on the effects of declining global market conditions on Indian startups. Last year saw a decline in funding activity within the Indian startup ecosystem, but valuations of much larger startups remained unchanged as they either raised capital through convertible bonds (postponing price discovery to a later stage) or chose not to raise funds at all to recruit.
SoftBank Group founder and CEO Masayoshi Son warned last year that the funding freeze for startups could continue as some unicorn companies were reluctant to accept lower valuations during new funding negotiations.
However, it is critical to recognize that investors assess the equity value of their existing startup portfolios in different ways. Consequently, a single investor’s valuation adjustment, however significant, does not necessarily reflect the views of other investors, and in some cases even the startups themselves.
Invesco states that the performance of “market participants” is one of the factors it considers when determining the valuation of its portfolio startups. Particularly during the January period, when Swiggy’s valuation was adjusted, Zomato’s market cap traded significantly below its current level. Consequently, it is likely that Invesco’s perception of Swiggy’s valuation has improved in the following months as market conditions have evolved.