Zomato is likely to add more fodder to the ongoing bitter battle with its rival Swiggy as sources have claimed to The Economic Times (ET) that it is likely to raise $1bn in new funding round. This seems to be a counter move to Swiggy’s recent funding round that saw the Bengaluru based firm raising similar amount few weeks back. That bumper funding round certainly helped in sharpening the Naspers backed company’s financial muscle and thereby promoting Zomato to search for a new capital raising round.
Zomato is pursuing talks with Chinese private equity major Primavera Capital and existing investor Ant Financial for the fresh funding round, ET claimed after citing unidentified sources.
“There is a new round that we are talking to potential investors (including Ant Financial) for our new fundraise. This will be at a premium to the last round as the company has more than doubled in size since the last round was finalized,” an unidentified source told ET.
Another source claimed that Swiggy’s arch-rival may not allow Ant Financial to make a big contribution to the funding round this time around as it has already started talking to other investors. This is because Ant Financial already owns 28 percent in the Gurgaon based company and another large funding contribution would give the Alibaba affiliated company a dominant role in the company’s management.
Rumour mills are also buzzing with the report that Zomato was surprised by Swiggy’s recent $1 Bn funding round as it expected the latter to settle for a modest funding round.
Foodtech is Proving to be a Money Guzzling Sector
How capital intensive the foodtech sector is indicated by the fact that both Zomato and Swiggy are spending $30-40 million each every month for showering discounts to customers & incentives to their delivery personnel. Both these companies may face additional pressure on their Capex if UberEats and FoodPanda start gaining good ground in the market.
Even if UberEats and FoodPanda fail to perform, both the incumbent leaders will require mammoth capital in their reserves to maintain their leadership in the intensively competitive market.