Zomato Valuation: India's Food Delivery Giant Reaches $5.4 Billion

Zomato Secures Additional Funding Ahead of IPO

Zomato, the Indian food delivery startup, has recently obtained $250 million in new funding. This investment arrives just two months following the completion of a $660 million Series J financing round.

Investment Details and Valuation

The latest capital injection was provided by several investors, including Kora ($115 million), Fidelity ($55 million), Tiger Global ($50 million), Bow Wave ($20 million), and Dragoneer ($10 million).

Info Edge, a publicly listed investor in Zomato, disclosed this information in a filing to the stock exchange (PDF). This new investment elevates Zomato’s post-money valuation to $5.4 billion, a significant increase from the $3.9 billion valuation recorded in December of the previous year.

Info Edge currently holds an 18.4% stake in the Gurgaon-based startup.

Market Position and Competition

This funding demonstrates considerable investor confidence in Zomato, particularly considering the challenges the company faced in securing investment throughout much of the past year.

Zomato, which integrated Uber’s Indian food delivery operations last year, primarily competes with Swiggy, backed by Prosus Ventures, which is valued at approximately $3.6 billion.

Collectively, these two companies employ over 440,000 delivery personnel, exceeding the workforce of the Indian Department of Posts.

Expanding Market Presence

Amazon also entered the Indian food delivery market last year, although its services are currently limited to select areas of Bangalore.

Market Growth and Analysis

Analysts at Bernstein predict substantial growth in India’s food delivery market, projecting a value of $12 billion by 2022. According to their report, Zomato currently holds approximately 50% of the market share among the three major players.

Analysts at Bank of America, in a recent report, highlighted the positive outlook for the Indian food-tech industry, noting its potential for sustained growth and improving unit economics.

Financial Improvements and Challenges

Both Zomato and Swiggy have demonstrated financial improvements in recent years. This is noteworthy given the inherent difficulties in achieving profitability within the food delivery sector in India.

Unlike markets like the U.S., where the average delivery order value is around $33, the equivalent in India typically ranges from $3 to $4, as indicated by research firms.

Impact of the Pandemic and Future Plans

Both startups were compelled to reduce their workforce last year due to the impact of the coronavirus pandemic. However, Zomato’s co-founder and CEO, Deepinder Goyal, stated in December that the food delivery market was showing strong signs of recovery.

December 2020 is anticipated to be the highest-grossing month in the company’s history, with a 25% increase in Gross Merchandise Value (GMV) compared to previous peaks in February 2020.

Goyal expressed optimism about the future, emphasizing the positive impact Zomato will have on its customers, delivery partners, and restaurant partners.

In a September email to employees, Goyal revealed that Zomato had been preparing for an IPO in the first half of 2021 and was raising capital to strengthen its financial position for potential mergers and acquisitions, as well as to address any competitive pressures.