According to reports in a business newspaper, SoftBank is exploring a possible investment in restaurant discovery and food delivery firm Zomato.
In February 2018, Zomato raised $150 million from Ant Small and Micro Financial Services Group, which is the payment affiliate of Alibaba, valuing it to about $1.1 billion.
The Japanese technology conglomerate’s talks with Zomato come six months after it was exploring a possible funding of up to $200-250 million in Bengaluru-based Swiggy. Ultimately in February 2018, both Naspers and China’s e-commerce Platform Meituan- Dianping invested US $100 million in Swiggy. In March 2018, it was also talks with DST Global as well as global hedge fund Coatue for fund infusion.
Soft-Bank, which has backed Flipkart and also Paytm, aims to now play the kingmaker in the food delivery market.
“SoftBank’s meeting with Zomato, held earlier this week, is exploratory in nature,” says the same report.
The investment firm has also held multiple conversations with Swiggy for a possible investment.
According to the same report, “SoftBank discussed business metrics across Zomato’s three main business lines. One of the points of conversations revolved around Zomato’s international expansion over next few years. There is no guarantee the conversations will materialise into an investment.”
While SoftBank is still scanning India’s food delivery space looking to finalise a candidate for a likely investment of $200-400 million, “a final decision on its investment is likely to be taken by the year-end.”
Global investment firms are making a beeline for the fast-growing Indian food delivery sector. In 2017, the sector recorded a 125% increase in order volumes to 4.5 Lakh orders per day from about 2 Lakh orders per day in 2016, according to estimates from RedSeer Consulting.
Experts are of the view that the food delivery sector, which is essentially a logistics-driven business catering to one need – food, allows big-ticket investors to pour in large amounts of capital.
“For Softbank, to deploy large pools of capital of $100-400 million and move the needle, it needs core sectors such as (food delivery) that can absorb (such money) and give significant returns too,” said K Ganesh, founder of startup factory Growth Story, promoter of cloud kitchen firm Freshmenu and grocery portal Big Basket.
The intensifying war of capital between Swiggy and Zomato comes seven months after talks of a possible merger between the two companies fell apart, last November.
