Chinese investor, Ant Financial is in talks to finalise a fresh $600-million funding with online food delivery and restaurant discovery app Zomato. The deal, if signed, may now see its value zoom by over a billion dollars to over $3 billion.
Ant Financial, an affiliate company of the Chinese Alibaba Group, has been backing Zomato since it picked up a 14.7% stake in February last year. It followed that up by raising its stake to 23% in November last year, regulatory filings show. Industry observers say while there are no questions about the market opportunity and increasing acceptance of food delivery services, it’s a high cash burn business. Hence, a large cheque is imperative to stay in the game. “Zomato is working very closely with Paytm because one of the best use cases for payments is food,” said one person with direct knowledge of the situation.
Revenues of Zomato up from $68 million in FY18 to $206 million in FY19, while its losses stood at about $294 million. The loss for FY18 was not disclosed. Its expenses skyrocketed at a much faster pace as it spent $500 million during FY19, a six-fold jump from the $80 million it spent in the previous year. As of April 2019, Zomato’s food delivery business was operational in 500 cities in India. In FY20, Zomato completed around 214 million orders, compared to just 55 million orders in the same period last year. So far, Zomato has raised a total of $755.6 million in funding over 13 rounds (not including the $600 million, which is yet to be closed), according to Crunchbase estimates, and posted revenue of $206 million in FY19.
The investment would be the latest sign that China's top tech companies are doubling down on the Indian market. Shenzhen-based company, Tencent is Alibaba’s main rival in China, and is also building up its Indian network. But Alibaba and Tencent have pursued different strategies, with Alibaba and Ant taking larger, focused bets and Tencent opting for a series of smaller partnerships in the wake of its rejected $8bn bid for the Indian e-commerce site Flipkart.
The Chinese investments into India have put pressure on the Indian government to limit the foreign ownership of fast-growing Indian companies, particularly in the sensitive areas of finance and media. According to the estimates of professional services firm Deloitte, the online food delivery market for food aggregators and cloud kitchens is expected to be a $5 billion opportunity by the end of 2023 in the country.