Zomato raises fresh funds of $60 million, taking Info Edge’s stake down to 47%3 min read . Updated: 08 Sep 2015, 01:37 PM IST
The company has raised the funds largely from Singapore's Temasek Holdings and existing investor Vy Capital
New Delhi: Zomato Media Pvt. Ltd, a restaurant search and review website, has raised $60 million in fresh capital, largely from Singapore’s Temasek Holdings Pte and existing investor Vy Capital, valuing the company at about a billion dollars.
The Gurgaon-based company’s largest investor Info Edge (India) Ltd, which will own a 47% stake in Zomato after the latest transaction, did not participate in the current round of fund raising, according to a statement filed by Info Edge to BSE.
However, according to people close to the development, Zomato is eyeing a larger round and the $60 million is the quick money it wanted to grab amid early signs of a slowing market for venture capital and private equity funds.
Zomato, founded in 2008, will use the money to further grow its new business verticals such as food ordering, the company said in a statement.
Nearly half of the current $60 million will go towards the India business, said Deepinder Goyal, founder and chief executive officer of Zomato. “In the next 3-4 months we will focus on growing our services business in the countries that we are present in. We are not looking to expand into more than two new countries." He did not share details on the new markets.
“We will use this round to make investments in our new businesses such as online ordering, table reservations, point of sales, and our newly launched white-label platform (custom apps for restaurants to go online). With this round, and with some of our markets turning profitable recently, Zomato is well-capitalized for at least two years. We are also stoked to have Temasek partner with us, and are looking forward to building one of the largest food-tech companies in the world," said Goyal.
The current round takes Zomato’s total funding to about $225 million from Info Edge, Sequoia India, Vy Capital and Temasek.
Temasek ventured into the digital commerce segment last year when it invested in e-commerce platform Snapdeal.com, co-founded by Kunal Bahl, and Manthan, a data analytics company focused on the retail sector. This year the firm has acquired a stake in policybazaar.com.
Info Edge, which held close to 50.1% before the current deal, has stayed away from participating in the current round.
“Zomato’s appetite for capital has gone up and given the size of our balance sheet, we need support from other investors," said Sanjeev Bikhchandani, founder and executive vice-chairman Info Edge, a publicly listed entity.
For the fiscal year 2014-2015, Zomato reported net sales of ₹ 96.67 crore on a consolidated basis, compared with ₹ 30.6 crore during the previous financial year, according to Info Edge’s annual report. Total revenue increased by 214% from ₹ 36.12 crore in FY4 to ₹ 113.57 crore in FY15.
According to Vineet Toshniwal, managing director at Equirus Capital, Indian markets tend to be guided by profitability. “Hence investors in listed entities will take a step back from betting on businesses that are far from profitability."
Zomato’s model has also focused on acquisition-led growth.
Zomato acquired companies including US-based Urbanspoon and Nextable, Turkey’s Mekanist, Cibando in Italy, Menu Mania in New Zealand, Lunchtime in the Czech Republic and Obedovat in Slovakia, among others, within a six-month period.
Earlier this week, Zomato acquired high single-digit stakes in hyperlocal delivery companies Grab and Pickingo in a move to strengthen its food-ordering business.
Zomato introduced a food-ordering option in India this year after well-funded food-tech start-ups such as Foodpanda, TinyOwl and Swiggy had already grabbed a significant chunk of the market. While Zomato is planning to outsource the function of last-mile delivery, Foodpanda, TinyOwl and Swiggy have decided to build the capability in-house to keep a tighter control over the service.
Zomato’s online ordering services are currently available for around 12,000 restaurant partners, and it expects to take that to more than 20,000 by the end of this year. It currently has 70,000 restaurants listed on its India platform.
Founded by Goyal and Pankaj Chaddah, Zomato is already getting close to 6,000 orders a day on its platform, with an average order size of ₹ 600. The company is expecting the food-ordering business to contribute significantly to its revenue. It currently charges close to 10% commission on every order.