Footech Unicorn Zomato Raises $52 Million From US Based Kora Investments, Likely To Go Public By Q1FY2021

Zomato is an Indian restaurant aggregator and food delivery start-up

With the continuing efforts to bolster its cash reserves at a time when the food delivery sector is rebounding from the ravages of the coronavirus pandemic, Foodtech unicorn Zomato has raised $52 million from US-based Kora Investments.

Zomato raised the fund as part of ongoing funding round and the online food delivery app is expected to raise as much as $600 million. This year until now Zomato raised more than $270 million through the funding round.

Zomato, last month closed a $62 million funding from MacRitchie Investments, a unit of Singapore state investment arm Temasek, and an additional $103 million from Tiger Global, a US-based hedge fund.

In the coming months, Kora is expected to make a follow-up investment of a larger amount in Zomato.

The current fundraising strategy of Zomato is to get more hedge funds on board for probable investments. As these funds look for a faster exit, Its plan on going public is making it an attractive proposition for them. Investors are taking a moderate approach because the food tech is yet to justify its valuation in the public markets.

In the next few months, the food tech major is planning to raise more funds from other hedge funds.

In September, Zomato founder and CEO Deepinder Goyal communicated to the employees that the company already has $250 million in the bank (after its fundraise from Tiger Global), and will use the cash reserve as a weapon to fight the price war or any sort of war from the competitors.

According to Goyal,  Zomato is likely to go public in the first half of the next financial year.

In the latest fundraising, Zomato Pvt. Ltd has allotted 12,656 Class J5 preferential dividend shares to Kora Investment I LLC at an issue price of ₹300,235, totaling a more than 1% stake in the food tech major.

The current capital raise boosted the valuation of Gurugram-based Zomato at $3.3 billion. Zomato in the current financial year doubled its revenue to $394 million, although losses marginally widened to $293 million from $277 million.

Zomato in January raised $150 million from Ant Financial. However, at that time, Zomato only received $50 million as a part of the first tranche of the investment. In January, the funding from Ant Financial valued the online food delivery startup at $3 billion. 

Zomato is also looking to raise funds from Temasek Holdings after plans to raise funds from ANT Financial hit a roadblock. Due to the implementation of new FDI rule, any country that shares a land border with India must seek government clearance over any investment proposal

Zomato’s business back to the pre-Covid peak, IPL played a key role 

Zomato’s food delivery volumes touched pre-Covid-19 peaks, Swiggy said that overall, the food delivery business has recovered about 80-85 percent of the pre-Covid order values. The recovery is taking place after multiple rounds of unlocks, as restaurants open up for business.

Over 100 million orders have been placed on the Swiggy app for food, groceries, medicines and other household items since the lockdown. Almost over 200 cities have reached 90 percent of their pre-Covid GMV (gross merchandise value) levels with more than 70 cities seeing a full recovery. 

“In fact, they have seen double-digit growth over the past 4-5 weeks, especially when the lockdown opened and when consumer’s fears of Covid-19 subsided,” said Swiggy. “Certain micro pockets within the country have also reached 200 percent of their pre-Covid levels,” it added.

Zomato Founder and CEO Deepinder Goyal said that a number of cities (India food delivery volumes) are now at over 120 percent of pre-Covid peaks. “Food delivery is one of the safest recreational options available to our customers during the pandemic. Going forward, we anticipate the food delivery sector to continue to grow at about 15-25 percent m-o-m (month-over-month) for the foreseeable future,” said Goyal in a tweet.

He said since the end of March, Gurugram-based Zomato had delivered a total of 92 million orders – and there have been zero reported cases of  Covid transmission through food delivery or food delivery agents.

He said that a few weeks ago, the WHO (World Health Organization) had categorically stated that people should not fear food or its packaging, processing or delivery.

Rohan Agarwal, director at research firm RedSeer Consulting, said the Indian Premier League (IPL) and its promotion in the form of campaigns and engagements had strengthened food volumes.

“IPL has played a key role, Due to IPL event food delivery volumes are seeing a jump and food tech companies are capitalizing on that demand,” said Agarwal. “IPL is like a festive season for food delivery platforms. During IPL, consumers come together to watch the matches. Snacking together is one of the associated behaviors,”  he said. 

Given the absence of live sporting action on account of the Covid-19 pandemic, analysts have said that consolidated viewership across TV and digital could cross 700 million this year for IPL. This stood at over 600 million last year.

RedSeer’s Agarwal said over the last few months, the food delivery business has started to recover slowly as the perception related to the fear of catching the virus due to food delivery is reducing and consumers have also started to spend discretionary expenses on ordering food.