As Indian food delivery giant Zomato awaits USD 100 million from Ant Financial, an affiliate company of the Chinese e-commerce giant Alibaba, the Gurugram-based startup is in talks with Singapore’s sovereign wealth fund Temasek to raise USD 100 million.
According to a local media Economic Times (ET) report, the potential investment from Temasek would be a part of USD 600 million funding round that Zomato founder Deepinder Goyal had kicked off late last year.
“The round (from Temasek) was almost finalized, but the terms of the deal are being renegotiated given the impact of COVID-19 on business operations, India’s investment policies, and competitive landscape with Amazon’s launch (of its food delivery business),” one of the sources told ET. “COVID-19 has hurt both the profitable listing and discovery businesses as well as the food delivery arm (of Zomato),” the source said.
Temasek first invested in Zomato in 2015 and is currently said to have a 3% stake. It has been present in India for 15 years and operates a USD 11 billion portfolio in India, just 5% of its global portfolio. In India, Temasek has invested in companies such as fitness startup Cure.fit, cab-hailing major Ola, and payments company Pine Labs, among many others.
With over 25% stake, Ant Financial is the largest institutional stakeholder in Zomato. The company has been depending on the Hangzhou-headquartered firm for the capital to sail through the slump brought upon by the global healthcare crisis.
In January this year, Zomato announced it has raised USD 150 million from Ant Financial as a part of the larger round, but only received USD 50 million. Now that the investment from its biggest investor is stuck due to the change in FDI norms, Zomato has turned to Temasek, a smaller shareholder.
India had changed the FDI rules in April, making it mandatory for companies hailing from countries that share a land border with India such as China, to take regulatory approval from Indian authorities for any investment in the country. Subsequently, Ant Financial is evaluating whether a separate government approval is required to wire the money since the commitment to Zomato was made before the change in rules.
Since it is uncertain how much time the process is likely to take, Zomato is looking for new avenues to raise money. According to the ET report, Info Edge, in its recent analyst call said Zomato has continued to receive interest from both new and existing investors for the fresh round of funding to the tune of USD 300 to 400 million.
As a part of its ongoing round, Zomato had raised USD 5 million from UK-based Pacific Horizon Investment Trust. The fresh capital is needed not only to sail through the pandemic but also to protect market share from the rival Swiggy, which has been sharpening its focus on grocery delivery and hyperlocal services.
In May, Zomato, which is estimated to have 4,000 employees, said it had to let go of 13% of its workforce. In a blog, Goyal had said, “Our business has been severely affected by the COVID lockdowns. A large number of restaurants have already shut down permanently, and we know that this is just the tip of the iceberg. I expect the number of restaurants to shrink by 25-40% over the next 6-12 months.”