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Ant Financial leads USD 150 million funding in Indian food delivery giant Zomato

Valued at USD 3 billion, Zomato will close USD 600 million round in the next two months.

Picture by Avanish Tiwary

Alibaba-backed Indian food delivery giant Zomato has refilled its war chest with USD 150 million for the long battle ahead for the country’s soon-to-be USD 17.02 billion food-tech market with rivals Naspers and Tencent-backed Swiggy and UberEats.

As a part of USD 600-million funding that Zomato founder Deepinder Goyal said the company aims to raise from existing investor Ant Financial, the Gurugram-headquartered company has received USD 150 million at a valuation of USD 3 billion, local media Economic Times reported. The report said the company is likely to close the funding in the next two months.

Aside from Ant Financial, Zomato’s other large investors include Indian internet company Info Edge, Silicon Valley venture fund Sequoia Capital, and Singapore government-backed Temasek Holdings.

In March 2019, Zomato was valued at USD 2 billion when it sold its overseas delivery business in UAE to Berlin-based Delivery Hero for USD 172 million and closed USD 315 million round from US-based Glade Brook Capital, Ant Financial, and Delivery Hero. At about the same time, HSBC Global Research, the brokerage arm of British multinational investment bank HSBC, raised Zomato’s valuation to USD 3.6 billion last year.

This comes a month after local media reported Zomato may be looking to acquire UberEats in a share-swap deal, pegged at USD 300-400 million, and may involve Uber investing an additional USD 150-200 million in the new combined entity. However, as per the new ET report, it is not certain “whether Uber will proceed with the investment.”

India’s food delivery market seems to be heading toward consolidation amidst high cash burn. In 2018, 15 million Indian ordered food online, placing 640 million orders worth USD 2 billion in gross merchandise value, according to research and advisory firm Praxis Global Alliance.

Satish Meena, an analyst at research firm Forrester, believes that the consumer base for the food tech companies in India is not big enough for them to make money yet, which makes food delivery a loss-making proposition.

“Food delivery is not a business where you can make money. So you have to find other ways of making money,” said Meena in an earlier interview with KrASIA. “To make up for the delivery cost and earn money, companies like Zomato and Swiggy are trying to diversify their revenues. But they have faced issues with restaurants in the past in trying to do so.”

Meena said the bigger opportunity for food delivery companies is to provide cloud kitchens—infrastructure for online restaurants—and create private labels.

According to industry estimates, Zomato and Swiggy lose USD 0.1 to 0.4 (INR 10-30) per delivery. Zomato claims to process 1.2 to 1.3 million orders per day, while Swiggy clocks 1.4  to 1.6 million orders a day.

However, Zomato has reportedly cut down its cash burn to USD 20 million a month from USD 45 million in early 2019. Swiggy too has started eyeing reducing its expenses, pegged at around USD 30 million a month, since last year. In fact, just last week, ET reported Swiggy might increase the commission it charges to restaurants while increasing the delivery fee in a bid to better its unit economics.