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Zomato to set up NBFC, invest in two more startups amid plunge in stock

Zomato has been investing aggressively in many startups, since the company got listed on the stock exchanges in July last year. (Photo: Mint)Premium
Zomato has been investing aggressively in many startups, since the company got listed on the stock exchanges in July last year. (Photo: Mint)

  • Zomato will invest 112.21 crore in AdOnMo Pvt Ltd, an advertising technology company, for a 19.48% stake. The online food aggregator will also pump in 37.39 crore for a 5% stake in UrbanPiper Technology Pvt Ltd, a software services company

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MUMBAI : Food delivery platform Zomato Ltd on Friday said it will set up a wholly-owned non-banking financial company (NBFC) and invest in two technology startups.

In a stock exchange filing, Zomato said it will invest 112.21 crore in adtech firm AdOnMo Pvt. Ltd for a 19.48% stake, and 37.39 crore in restaurant software maker UrbanPiper Technology Pvt. Ltd for a 5% stake. Zomato also plans to set up an NBFC with a proposed authorized share capital of 10 crore.

The announcement comes at a time Zomato’s market capitalization has plunged, with its shares falling over 35% in January.

Zomato said it will utilize AdOnMo’s platform, which targets digital advertising beyond personal devices to outdoor digital screens, for customer acquisition. As of 31 March 2021, the company had a turnover of 3.27 crore. UrbanPiper is a business-to-business (B2B) software platform enabling restaurants to integrate multiple players through a single digital interface. Zomato said UrbanPiper processes 12 million orders a month at over 23,000 restaurants. UrbanPiper raised $7.5 million in its Series A round of funding led by Tiger Global Management and Sequoia Capital in October 2019. As of March 2021, the company had a turnover of 6.34 crore, the filing said.

“Both UrbanPiper and AdOnMo investments are synergistic to our core business and will help accelerate growth of these companies which will help in filling important gaps in the food ordering and delivery ecosystem in India," Zomato said.

The two investments and the NBFC plan comes at a time many shareholders have raised concerns over the profitability of new-age technology companies like Zomato.

Shares of other new-age tech companies including Nykaa, operated by FSN E-Commerce, PB Fintech, parent of Policy Bazaar, and One97 Communications, which operates Paytm have also fallen 15-35%.

Zomato reported a net loss of 430 crore for the quarter ended September 2021, against a net loss of 229 crore in the same period last year.

Recently, in an internal communication, the company’s founder and chief executive officer Deepinder Goyal told employees he was waiting for a bear market for a long time, as only companies with ‘solid teams and execution’ manage to rise amid a bear market.

Goyal had also told employees that Zomato is adequately capitalized and employees do not need to worry about anything except execution.

Zomato has been investing aggressively in many startups, since the company got listed on the stock exchanges in July last year.

The company invested in Shiprocket, an e-commerce shipping and enablement platform in November. The company also invested $50 million in Samast Technologies Pvt. Ltd, which operates hyperlocal discovery platform magicpin.

It also invested $50 million in Curefit, giving it a cumulative shareholding of 6.4% in the company that had valued Curefit at $1.5 billion.

Goyal wrote in a blog in November that Zomato is setting aside a war chest of $1 billion to invest in multiple startups over the next two years.

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