Ant Financial Invests $150 Million In Zomato; Increasing Its Valuation To $3 Billion

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Source: Business Today

Zomato has raised $150 million from existing investor Ant Financial, said people familiar with the matter, valuing the online food delivery and restaurant discovery platform at $3 billion. The capital is part of a larger $500-million funding round that is likely to close in the next two months, said another person in the know. 

Source: Ledger Insights

Ant Financial, an affiliate of Chinese internet behemoth Alibaba, has been backing Zomato since it picked up a 14.7% stake in 2018. It followed that up by raising its holding to 23% in November the same year, regulatory filings showed.

The latest funding comes at a time when ride-hailing app Uber is seeking to potentially invest in Zomato, along with selling its food delivery business UberEats in India.

Source: Photo by Jaap Arriens/NurPhoto via Getty Images

The stock-swap deal, pegged at $300 million, may go through soon if all terms are agreed upon, sources said, but it is not certain whether Uber will proceed with the investment.

Zomato was last valued at $2 billion when it picked up capital last year after it sold its UAE delivery business to Berlin-based Delivery Hero for $172 million (Rs 1,220 crore) and separately raised $105 million. The food delivery aggregator has been battling protests from restaurant associations, including the National Restaurant Association of India, for forcing deep discounts.

Source: Twitter

The latest funding will help the Gurugram-based company build ammunition as it fights a bruising war to fend off competitor Swiggy. Swiggy last raised $1billion led by existing backer Naspers, along with China’s Tencent, Hillhouse Capital and Wellington Management in December 2017.

Source: Swiggy

Over the course of last year, Zomato more than halved its cash burn to under $20 million a month from $45 million, in a bid to increase its runway. Late last year, Swiggy, too, started focusing on sustainable unit economics and launched initiatives to cut cash burn, which was pegged at around $30 million, indicating that the sector was moving to better economics.

For FY19, Zomato posted revenue of Rs 1,397 crore on a loss of Rs 1,001 crore, according to regulatory filings. A large part of the losses was on advertising and promotions.

The brokerage arm of diversified financial services firm HSBC raised Zomato’s valuation to $3.6 billion last year after taking stock of its publicly traded shareholder InfoEdge, which holds 26% in the restaurant recommendation platform. In a detailed report on Info-Edge, HSBC said Zomato’s business had changed fundamentally, with food delivery now contributing about 70% to total revenue.

“Given the scope of its recent expansion and the need for further funding, we value Zomato on a discounted cash flow basis, at $3.6 billion (at a marginal 9% premium to its competitor Swiggy as of the latest round of funding) versus $0.9 billion earlier due to the change in business focus,” the report noted.

Source: The Economic Times



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