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Mumbai/Bengaluru: Swiggy, India’s largest food delivery service, is in talks to raise as much as $700 million from new investors such as Tencent Holdings Ltd and plans to use the fresh funds to enter new businesses and areas, especially in the hyperlocal delivery space, according to three people aware of the discussions. Swiggy, which raised funds earlier this year at a valuation of about $1.3 billion, may see its valuation nearly double to at least $2.5 billion, said the people mentioned above.

Mint first reported on 3 August that Swiggy was in talks to raise fresh funds amounting to at least $500 million and that it had held talks with SoftBank Group Corp. However, SoftBank is currently more likely to invest in Zomato, and the talks with Swiggy have fallen through, said the people mentioned above, all of whom spoke on condition of anonymity.

Swiggy’s plans to ramp up and enter new areas have intensified over the past six months and have drawn comparisons to the playbook adopted by Chinese food delivery giant Meituan Dianping, which—over the years—diversified and entered a number of new hyperlocal delivery businesses. Meituan also happens to be an existing investor in Swiggy.

To expand into hyperlocal delivery, Swiggy is following a hybrid approach: while it is building some of these capabilities from scratch inside the company, it is also aggressively looking to partner with, or buy out, emerging startups in the hyperlocal space, the people mentioned above said. For instance, a few weeks ago, Swiggy bought out milk delivery start-up Suprdaily, signalling its intentions to enter the online grocery delivery space, which is currently dominated by the likes of BigBasket. In August, Swiggy also bought Mumbai-based Scootsy, which delivers restaurant and gourmet food, toys, beauty, electronics and other products.

Swiggy did not reply immediately to an email seeking comment, but in an interview in August, its co-founder and chief executive officer, Sriharsha Majety, had indicated that the online food ordering and delivery startup will be experimenting with a bunch of new offerings over the coming months.

“We are experimenting with some such (hyperlocal) categories," Majety said in an August interview. “We’ve been closely observing our consumers’ lives and we feel that there are some unique capabilities that we have that can take a shot at solving more problems, even outside the realm of food. You’ll see us start making small forays into new areas."

Majety had also said that Swiggy would be open to raising more funds to accelerate the pace of its expansion, even though the startup is currently well-funded and is in no hurry to raise more capital.

“It’s not about ‘do we have to’ as much as we want to. If there’s an investor that we’d like to work with who can help us accelerate the vision that we have, we’re definitely going to go after it….We as a company have an ambition to do a lot more. In a growing category, it is important to participate in it and naturally do justice to it, that’s what we’re taking it (funding) for," said Majety.

ALSO READ | How Swiggy became India’s fastest unicorn

“We are well-capitalized. If there are any opportunities to work with great investors, and if we want to be even more ambitious about our growth, we may pursue it deliberately—but not like something that we have to," he added.

Swiggy has raised $465 million till date—the most by an online food delivery firm. Rival Zomato has raised about $375 million. While Swiggy is well-capitalized, it needs to keep raising even more cash in order to win share in a hyper-competitive market. Mint reported in August that Swiggy and Zomato are spending hundreds of crores of rupees on locking in delivery staff.

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