Zomato has roped in two new investors — Tiger Global and Kora Capital — in an ongoing funding round valuing the food ordering and restaurant discovery platform at around $3 billion, according to people aware of the development.
The company has raised around $250 million collectively from Tiger, Kora and Singapore’s sovereign wealth fund Temasek, an existing investor. Tiger may pump in another $100 million if Zomato is able to regain pre-Covid business volumes, sources told ET. “The funds from Temasek and Tiger are in, and Kora’s money is expected in about a week,” said a person privy to the details.
For now, Temasek has invested $60 million, while $100 million each is coming from Tiger and Kora, a hedge fund focused on emerging markets.
While New York-headquartered Tiger is one of the most prominent investors in Indian startups, for Kora, the Zomato deal — if completed — will be its maiden bet on an Indian internet firm. Last year, Kora invested $125 million in financial services conglomerate Edelweiss, marking its first bet in India. ET first reported about Temasek’s potential investment in Zomato in its June 30 edition.
For Zomato, the new round of financing led by US and Singapore-based financial investors comes amid uncertainty surrounding the India strategy of its prominent backer — China’s Ant Financial.
Alibaba’s sister company, Ant, which holds 25% in Zomato, had committed to investing $150 million in January. However, Zomato has been able to access only $50 million so far.
The changing stance by Chinese investors such as Ant comes amid a wave of anti-China sentiment sweeping across India and also globally, especially in the US.
In addition, India’s new FDI rules introduced in April require regulatory approval for any investment from a country that shares a land border with the country.
Cutting China exposure
Zomato’s diversification of its investor pool is a significant move for India’s technology ecosystem as it actively looks to cut exposure to China. In all, China-based funds have invested an estimated $4 billion in Indian startups, according to data from Gateway House.
Replying to ET’s queries, a representative for Zomato said, “We don’t comment on rumours or speculations about our capital raises.”
On the company’s business prospects, the spokesperson said that due “improved unit economics over the past 12 months, and the strong recovery of our food delivery business (at 80% of pre-Covid levels), we are evaluating if going public would make sense for our business in the near future.”
However, as “a lot depends on the external environment, we can’t comment on either the certainty, or the timing of it”, the person said. Emailed queries to Kora and Temasek did not elicit any response till press time Wednesday while Tiger Global did not offer a comment on the development.
Food-ordering volumes recover after a major hit
Even as food delivery volumes have touched 80% pre-covid-19 levels, Zomato’s dining-out business has been hit hard as restaurants shutter.
At its peak in October last year, the online food delivery sector touched milestones of close to 3.2-3.5 million deliveries a day, but since then has only clocked a meagre 1-2% growth rate. This happened due to rationalising of discounts and the sale of Uber Eats India to Zomato, which took a significant player out of the market.
Further, Covid-19 hit volumes severely touching a low of 10% of peak numbers in the months of April and May. Since then, the order volumes have gradually recovered. Last month, ET reported that customers ordering food online are spending about 25-30% more per takeaway inching up overall sales to 80% of pre-Covid19 numbers.
For the financial year ended March 31, Zomato said that revenue more than doubled to $394 million, even as losses widened to $293 million from $277 million in the previous fiscal year. For the month of July, the company said its monthly burn rate is under $1 million, while revenue recovered 60% of pre-Covid-19 peaks.
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