Ant Financial to lead USD 600 million funding in Indian food tech Zomato

Zomato and Swiggy are capital hungry to scale up as competition intensifies.

Photo by Dylan Mullins on Unsplash

Gurugram-based food tech company Zomato is in early talks with investors to raise USD 600 million in a funding round led by Chinese e-commerce giant Alibaba’s affiliate Ant Financial, according to a local news paper Economic Times that quoted two sources aware of the development.

“While Ant Financial is leading the round and pumping in about USD 200 million, the rest of the capital is coming from existing backers like Temasek and others. A bunch of hedge funds may pool in about USD150-200 million as well. These funds will be utilised to fuel our ambitions in food delivery, dining out and sustainability,” one of the sources said.

Ant Financial first came in as an investor in Zomato early last year, and according to regulatory filings it raised its stake in the food delivery unicorn to 23% in November 2018. If this funding goes through, Zomato’s valuation could cross USD 3 billion, and Ant Financial will seek a raise in its stake to 29%, making it the largest shareholder in Zomato, ahead of InfoEdge.

The 2008 founded restaurant aggregator has the backing of other heavy-weight investors like Silicon Valley venture fund Sequoia Capital, Singapore Government’s Temasek Holdings and Info Edge–its largest shareholder as of now.

In its performance figure for the first half of fiscal year 2020, Zomato claimed an increase of about 225% in its half-yearly revenues, now touching USD 205 million. Zomato has more than 1.4 million active restaurants on its platform and delivers about 40 million orders a month. The firm now claims to deliver food in 500 cities, which is up from 200 cities in April 2019. KrASIA couldn’t independently verify the above mentioned figures.

On the other hand, Bengaluru-based food delivery company Swiggy seems to be on course to breathing down Zomato’s neck. Sources told Economic Times that Swiggy is in discussions with new investors including Korea Investment Partners, Mirae Asset Management, STIC Investments, and Neoplux to raise USD 500 million.

Swiggy has the backing of South Africa headquartered internet company Naspers, its largest investor with 40% stake in the company that has now gotten into grocery delivery as well.

Zomato and Swiggy were burning USD 40-50 million each monthly earlier this year. However, both have trimmed the cash burn extensively on restaurant acquisition and customer discounts. Zomato now claims that it has slashed cash burn to 60% of what it was six months ago.