Food-tech startup Zomato Media Pvt. Ltd is in talks to raise $400 million, largely from existing investors Ant Financial and Temasek, at a valuation of as much as $2 billion, as has been reported by media.
Zomato is also in talks with Alibaba Group for the existing funding round that could value the company anywhere from $1.6-$2 billion pre-money, people close to the development have said.
The development comes after Zomato’s arch-rival Swiggy on Thursday announced a fresh funding of $210 million, the largest by a food-tech startup. New investors this time included DST and Coatue Management, joining existing backers Naspers and Meituan Dianping, the Chinese food-delivery juggernaut. The startup said it would use the funds to improve its supply chain and technology while expanding into new markets.
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Zomato has made no comment on this issue.
Both Swiggy and Zomato were in talks to raise next round funds within two months after raising $100 million and $150 million respectively in the month of April.
The Indian food delivery sector
Global investment firms are making a beeline for the fast-growing Indian food delivery sector. In 2017, the sector recorded a 125% increase in order volumes to 4.5 lakh orders per day from about 2 lakh orders per day in 2016, according to estimates from RedSeer Consulting. The food-tech sector has once again bounced back on the back of new entrants such as UberEATS and Ola’s acquisition of Foodpanda.
Though experts remain divided over the valuation of food-tech startups in India, both Swiggy and Zomato are aggressively expanding in newer cities, launching newer products and burning cash to win customers.
The intensifying war of capital between Swiggy and Zomato comes seven months after talks of a possible merger between the two companies fell apart, last November.
While valuation differences and business alignment have made the merger conversations rather turbulent, people aware of the developments maintain a possible merger has not been completely ruled out yet.
Zomato, which is present in 23 countries, earns revenues from advertising and food delivery.
Zomato almost doubled its revenue to Rs 399 crore in the year ended 31 March 2017 and saw a drop in losses to Rs 389 crore from Rs 590 crore, a year ago. Currently, Zomato makes about $13.4 million in revenues per month.
Swiggy currently operates in 15 cities and continues to expand its reach to newer cities. The company claims to have more than 35,000 restaurant partners on its platform and a delivery fleet of over 40,000 in Bengaluru, Delhi, Mumbai, Pune, Hyderabad, and Kolkata.
SoftBank’s interest in this sector
Japanese internet giant, SoftBank is considering a possible investment in restaurant discovery and food delivery firm Zomato, as per those close to the development. SoftBank’s talks with Zomato come six months after it first held conversations exploring a possible funding of up to $200-250 million in Bengaluru-based Swiggy.
SoftBank’s investment in any one of the two companies will tip the balance of power in favour of the chosen one.
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