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With UberEats and FoodPanda scaling down their businesses, it is now no secret that India’s foodtech sector is proving to be a major cash guzzler. The current two incumbent players Zomato and Swiggy are certainly expected to take advantage of the ongoing consolidation but even this won’t be possible without both keep raising funds at regular intervals.
And taking cue from this market situation, Zomato is now on the verge of finalizing a fresh fundraising round of nearly $600 Mn. A report published in Economic Times claims that existing investor Ant Financial will spearhead the round while Singapore based Temasek is also expected to pump capital in this round.
ET’s report further claims that the latest round will swell the Gurgaon based company’s valuation to $ 3 Bn and will also increase Ant Financial’s stake to nearly 29% in the company – making Alibaba affiliated company the largest stake holder in the company.
The latest fundraising round will also spell much needed good news for Zomato, which been facing barrage of bad press during last few weeks. From its co-founder’s controversial tweet that ‘food has no religion’ to series of recent strikes that was threatening to get out of control.
The latest round will also put immediate pressure on another incumbent leader, Swiggy, to chase investors for signing new investment cheques.
Zomato and Swiggy will have to keep one eye on their balance sheets
In business (large or small) everything boils down to balance sheet and this fundamental rule obviously applies on the two incumbent leaders in India’s foodtech sector. Both players will have to work immensely hard to keep propelling their revenue and control their cash burn rate to squeeze losses.
Although this isn’t easy given that profit margin in the online food industry is wafer thin, Zomato and Swiggy are doing a pretty good job at it.
Barely 24 hours ago, Zomato announced that its revenue increased three fold (from last year’s $63 Mn) to clock revenue of $205 Mn in the ongoing financial year. Although the Gurgaon headquartered company didn’t disclose about its losses, it did mention about bringing down the cash burn rate substantially. It is roughly estimated that both incumbent players annually burn $30-40 Mn on discounts and other operating expenses.
Swiggy, on other hand, last year announced 232% increase in revenue to clock revenue of Rs 442 crore in Fy18.
