Zomato, an Indian FoodTech unicorn, adds $250 million to its kitty after latest investment coming from five different investment firms. Experts are of the opinion that the founders are readying their arsenal before they head for Initial Public Offering (IPO) later this year as per the companies’ vision.
Founded in 2008, Zomato is one of the first Indian start-ups, which is heading for an IPO. The FoodTech unicorn has constantly been prying for funds since 2020, in what was being thought to be its pre-IPO preparations. The new investment emphasises the confidence that investors have in Zomato and will also provide it with an edge over its closest competitor Swiggy valued at about $3.6 billion, backed by Prosus Ventures.
The latest investments come from firms like Kora Management, Fidelity Management, Tiger Global, Bow Wave Capital and Dragoneer Investment Group that were revealed from a regulatory filing by one of the company’s earliest investors Info Edge. After the latest funding round Zomato’s valuation is now pegged at around $ 5.4 billion from its previous valuation of around $ 3.6 billion.
The investments in both Zomato and Swiggy amid Covid-19 situation had stressed the investor confidence in the sector, which faced a severe brunt during lockdown days. Eventually, later with restaurants shut for dine-in options, food delivery services took an upward trend.
In a blog written on July 10, 2020 Zomato co founder Deepinder Goyal said, “COVID-19 has impacted the size of our business, it has accelerated our journey to profitability. In terms of the size of the business, COVID-19 has set us back by a year or so – but a year is only a small blip when you are building a company for the next 100 years.”
“Having said that, COVID-19 has positively impacted the health of our business – we seem to have gained 2-3 years along this vector. In July 2020, we estimate our monthly burn rate to land under $1m, while our revenue should land at ~60% of pre-COVID peaks ($23m per month). We expect to make a complete recovery in the coming 3-6 months while continuing to maintain tight control on costs/profitability,” he added in the blog.
The company participated in three major funding events in 2020, to raise its stake in the food delivery market in India, which is predicted to be worth $ 12 billion by 2022. Analysts at Kotak Institutional Equities said that online food delivery has around 15 million transacting users currently and likely to reach 80 million users in near future, with order capacity growing up to nearly five times a month from the current three to four times a month, making it lucrative for investors, especially in a duopoly market currently dominated by Zomato and Swiggy.
In ominous time of Covid-19, consumer interest has shifted towards online orders, which has kept the food delivery start-up dream in India chugging. The recent funding in Zomato only boosts the morals of both investors and consumers.
