Foodtech unicorn Zomato raises $100M from Tiger Global, others; eyes IPO in 2021

Foodtech major Zomato has raised Rs 760 crore or $102.5 million in its Series J funding round from Tiger Global Management. This funding tranche has come after the company closed a $62 million fund from Temasek’s MacRitchie Investments.
 
The online food delivery segment has seen significant growth in the last few years with Zomato and Swiggy competing head-on to grab market share. With the latest fundraise, Zomato is now reported to be valued at $3.4 billion, close to its rival Swiggy which is presently valued at $3.6 billion, according to media reports.
 
The current round comes immediately after a week Zomato raised $62 million from Singapore-based Temasek. Earlier, in January, it had raised $150 million as a part of a fresh fundraise from its existing investor Ant Financial. Further, in April, it bagged around $5 million (or about Rs 38 crore) from Pacific Horizon Investment Trust PLC in its Series J round.
 
Zomato has made an allotment of 25,313 Class J preference shares at an issue price of Rs 3,09,235 per share to raise the amount, shows regulatory filings.
 
Post allotment, Tiger Global would command a 3.01% stake in the company. Zomato is valued at $3.4 billion, post-money. The company was valued at $3.25 billion when it raised $5 million from Scotland-based Pacific Horizon Investment Trust in April earlier this year. 
 
So far, Zomato has picked up around $167 million in external funding in 2020. Prior to Temasek’s investment in August, the food-tech firm had scored $5 million from Pacific Horizon Investment Trust in March 2020. According to media reports, Zomato is also eyeing an Initial Public Offering (IPO) in 2021. 
 
In an email to its employees, Zomato CEO Deepinder Goyal said that the unicorn has raised a lot of money and has $250 million cash in the bank — which is more than ever in Zomato’s history. He also noted that Tiger Global, Temasek, Baillie Gifford, and Ant Financial have already participated in its current round, and more big names will be joining the round, which will end up Zomato with $600 million in the bank very soon. 
 
He added that this cash is being treated as a ‘war-chest’ for future M&A, and fighting off any ‘mischief or price wars’ from Zomato’s competition in various areas of its business. 
 
Despite the pandemic, the foodtech unicorn has been seeing an improved financial performance. While announcing its annual performance report on the unicorn’s 12th anniversary last month, Zomato said, “While COVID-19 has impacted the size of our business, it has accelerated our journey to profitability.” 
 
In July, Zomato estimated its burn-rate to be under $1 million, and revenue at close to 60 percent of pre-COVID-19 peaks of $23 million per month. “We expect to make a complete recovery over the next three to six months while continuing to maintain tight control on costs/profitability,” it said in its report.
 
It also added that Zomato’s FY20 India food delivery GMV grew by 108 percent over FY19. However, when the rise of COVID-19 cases started in March, Zomato’s food delivery business GMV was down by 80 percent as compared to its peak in February. It also acquired UberEats’ India vertical in January.
 
In July, Zomato had said its FY20 revenue jumped over two-fold to $394 million (around ₹2,960 crore) in FY20 from the previous fiscal, while its Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) loss was at around ₹2,200 crore in FY2019-20.
 
“We expect a sharp recovery in our order volumes as lockdowns continue to ease and the operating environment continues to improve. The unit economics of our food delivery business has improved consistently over the last 18 months. In Q1 FY20, we used to make a contribution margin of negative Rs 47 per order; in Q1 FY21, we made a contribution margin of positive Rs 27 per order,” said Deepinder Goyal, Co-founder and CEO, Zomato, in the report. 
 
In its latest report, published in August, Zomato estimated that business for the food delivery industry will come back to pre-covid levels in the next 2-3 months, with 70% of restaurants on its platform delivering food at present.
 
           Authored by Ayush Sharma 
           Content Developer, StartupMonk
 
 
 
 
 
 

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