Home / Companies / Start-ups /  Zomato in talks to buy delivery start-up Runnr in $20 million deal

Bengaluru: Food-technology start-up Zomato Media Pvt. Ltd is in advanced talks to acquire delivery start-up Runnr (Carthero Technologies Pvt. Ltd) in a move that will help Zomato strengthen its food delivery business, according to two people aware of the development.

The deal is likely to give Zomato a captive fleet of delivery personnel, a model similar to its rival Swiggy (Bundl Technologies Pvt. Ltd). While the final contours of the transaction are yet to be finalized, Zomato is likely to buy Runnr in an all-stock deal for about $20 million, said one of the two people cited above, both of whom spoke on condition of anonymity.

Zomato currently aggregates restaurants on its platform and works with third-party delivery partners such as Runnr and Grab to fulfil deliveries. The company had invested an undisclosed amount for a minority stake in Grab (Grab a Grub Services Pvt. Ltd) in September 2015 to strengthen the food delivery business.

Zomato started food delivery services in May 2015.

In a blog post in April, Zomato chief of staff Surobhi Das said that the company clocked revenue of $9 million in the year ended 31 March 2017, an eightfold growth over fiscal 2016. The company’s advertising revenue, its core business until it entered food delivery in May 2015, grew 58% to $38 million in fiscal 2017.

Zomato claims to have recorded 2.1 million monthly orders in March.

In comparison, Swiggy, its nearest rival, clocked revenue of Rs23.59 crore (about $4 million) for the year ended 31 March 2016, up from Rs11.59 lakh a year earlier. Losses bulged to Rs137.18 crore from Rs2.12 crore in fiscal 2015, the company’s filing with the Registrar of Companies shows.

Zomato’s total revenue in 2016-17 rose 80% from a year ago to touch $49 million due to the growth in advertisements and the food delivery business.

Between December 2016 and March 2017, Zomato had reduced its monthly cash burn globally to about $250,000, as against $4.2 million in March 2016, Mint had reported on 7 April.

In May last year, HSBC Securities and Capital Markets (India) Pvt. Ltd slashed its valuation by about half to $500 million. Zomato had raised $60 million in September 2015 from Temasek and Vy Capital at a valuation of nearly $1 billion. Overall, the company has raised about $225 million since inception in 2008.

Runnr, backed by Nexus Venture Partners, Blume Ventures and Sequoia Capital, has struggled to raise funds in the recent past. It has raised about $20-25 million since inception in 2015.

Runnr acquired Mumbai-based food delivery start-up Tinyowl Technology Pvt. Ltd in June 2016 and launched a consumer-facing food delivery platform a couple of months later. The consumer-facing business has since been suspended.

“Runnr has significantly reduced cash burn to $300,000-500,000 per month. But they have less than six months’ cash left. The current market scenario is grim and it may be difficult to raise more," said the first of the two people cited earlier.

A Zomato spokesperson and Mohit Kumar, co-founder and chief executive of Runnr, did not respond to emails seeking comments.

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