Ola may raise funds for Foodpanda
Bengaluru/New Delhi: Ola has held talks to buy private label food firms following its purchase of food ordering app Foodpanda, three people familiar with the matter said, as the cab hailing firm explores creating an independent food technology company.
Ola (ANI Technologies Pvt. Ltd) has held talks to buy food brand Freshmenu (Foodvista India Pvt. Ltd) and at least one similar firm, the people cited above said. No deal has been agreed yet with either firm, they said, on condition of anonymity as the talks are private.
Ola may raise funds separately for Foodpanda later this year to tap the strong investor demand for food-tech startups, the people said.
Freshmenu CEO Rashmi Daga denied that the company had held sale talks. “We have had no such discussions with either Foodpanda or Ola and do not plan on merging with Foodpanda or any other aggregator in the near future. We work with Foodpanda as an aggregator partner and our relationship is only up to that point,” Daga said in an email.
In December, Ola bought Foodpanda India from its German parent Delivery Hero AG in an all-stock deal and said it will invest $200 million to expand Foodpanda’s operations. Ola has made founding partner Pranav Jivrajka CEO of Foodpanda.
The proposed creation of a separate food entity is also part of Ola’s plan to have a group company-like structure similar to that of online retail firm Flipkart Ltd, the people said. Apart from its core cab hailing business and Foodpanda, Ola has a payments business called Ola Money. It also bought public transportation app Ridlr last week for an undisclosed amount.
Ola CEO Bhavish Aggarwal is considering ways to have independent assets that can together increase Ola’s valuation. Ola’s inspiration is its Bengaluru neighbour Flipkart, whose ownership of fashion retailers Myntra and Jabong as well as payments app PhonePe has made it more attractive to investors.
Ola didn’t respond to emails seeking comment.
The online food delivery business, which was written off not too long ago, has attracted much investor interest in the past six months. Mint reported on 2 April that both Swiggy (Bundl Technologies Pvt. Ltd) and Zomato Media Pvt. Ltd were in talks to raise more money, less than two months after raising funds, an indicator of the investor rush for food delivery start-ups. Ola and its arch-rival Uber are investing hundreds of crores of rupees to gain a slice of the market.
Swiggy is the leader in online food delivery with a 35-38% market share, followed by Zomato at 25-30%, according to RedSeer Consulting, an internet-focused consultancy. In 2017, average daily orders at food-ordering start-ups soared to 450,000 from 200,000 last year, RedSeer data shows. Food delivery has become a particularly lucrative opportunity for start-ups as margins in the business are much higher than in grocery delivery or e-commerce. But with Foodpanda, Zomato, and Uber all spending heavily to catch up with market leader Swiggy, margins are expected to take a hit over the next few years.