Zomato, the popular restaurant search service is in tough competition with UberEats to acquire the food delivery start-up Runnr. The $20-million, all-stock acquisition of Runnr will help Zomato to further grow its food delivery business against other rivals like FoodPanda and Swiggy.
Zomato has been a very good food-technology start-up and all the people use Zomato to find the best restaurants in the city and to read genuine reviews about the taste and quality of food in each restaurant. Zomato has been in discussions to acquire food-delivery start-up Runnr which is operated by Carthero Technologies Pvt. Ltd. The deal will add more food delivery personnel to Zomato and will help expand its food delivery business. Zomato is likely to $20 million in form of stocks for this acquisition based on the insider reports.
Zomato started its food delivery services during May 2015 and also operates its own kitchens in several places. Zomato currently operates as a middle-man by aggregating restaurants using the Zomato App and works with 3rd party services like Grab and Runnr for fulfilling the food delivery to its customers. The company has already an undisclosed amount to acquire a minority stake in Grab operated by Grub Services Pvt Ltd during Sep 2015 to expand its food delivery business. Zomato had raised $60 million in funding from VyCpital and Temasek and has been valued at around $1 billion. The company has raised more than $225 million since its inception in 2008.
According to ET reports, both Zomato and UberEats have given their term sheets to Runnr and it’s been rumoured that the offer from UberEats operated by the US-based ride-hailing company is much better than that of Zomato. Runnr which was previously called Roadrunnr was founded by Arpit Dave and Mohit Kumar in 2015, who were ex-employees of Flipkart. After merging with another food delivery app, TinyBowl the company was renamed as Runnr. It currently operates as a logistics company which delivers food to the customers in a tie-up with other food-delivery players in the market. The company has raised 47 crores in funding during Sep 2016 from its investors Blume Ventures and Nexus ventures partners. Though Runnr has considerably reduced its cash burn to $300,000-500,000 per month, they have less than 6 months of cash left in hand. Also, with the current market scenario being grim, they might not be able to raise more and are hence looking forward to the acquisition.
In a blog post in April, Zomato reported that they generated revenue of $49 million during the fiscal year 2016-17 which is eight times more than the revenue generated during the previous year. The company generates a major portion of its revenue through online and mobile advertising but since May 2015, their food delivery business has growth by 58% and reported an overall turnover of $38 million. Zomato claims they have processed more than 2.1 million monthly orders in March 2017 and is growing rapidly. Also, its total revenue increased by 80% to $49 million during the fiscal year ending March 2017. It was valued around $500 million during May 2016 by HSBC Securities and Capital Markets (India) Pvt. Ltd. Mohit Kumar, the chief executive and co-founder of Runnr was not available for comments regarding the acquisition plan.