India’s quick–commerce frenzy, which has boosted the fortunes of delivery firms such as Zomato and SoftBank-backed Swiggy, is not sustainable in the long run, a top Indian private equity fund’s chief said.
“These are passing fads and fantasies,” TVS Capital Funds Chairman Gopal Srinivasan, who manages assets worth about Rs 5,000 crore ($575 million), said in an interview.
“The question is whether this micro trend, which (is) running completely on PE or VC funding only without the multi-decadal (economic viability) aspect, will sustain or not.”
India’s quick–commerce industry, which promises deliveries within 10 minutes, was estimated to cross $6 billion in annual sales in 2024 from $100 million in 2020, according to Datum Intelligence.
Following in the footsteps of Swiggy’s Instamart and Zomato’s Blinkit, global retail giants Walmart-backed Flipkart and Amazon as well as Reliance Industries have started delivering goods from groceries to electronics instantly in the South Asian country.
Marquee funds such as Prosus, Tencent Holdings, Nexus Venture Partners and Info Edge are among the top shareholders in Zomato, Swiggy and peer Zepto, which own the biggest chunk of the quick commerce space.
Those parking money in the sector are buying “over-valued” assets and hoping to sell them at a higher price, following the “greater fool theory” investment strategy, TVS Capital’s Srinivasan said.
TVS Capital has backed around 30 businesses since 2007 and its portfolio is dominated by financial services firms such as Vivriti Capital and Five Star Business Finance.
Its investments include Walmart-backed fintech firm PhonePe and insurance tech firm Digit Insurance. TVS Capital had invested in beauty e-commerce firm Nykaa, which it exited in 2018.
“We looked at Swiggy, Zomato. We didn’t know enough, so we walked away,” Srinivasan said.
“Nykaa was clearly a deeper trend, because the way we looked at it is women coming into the workforce in massive quantities… and fundamentally, the fact that they will have to appear as professional as they can,” he said.
Reuters
