Alibaba-backed Zomato that announced USD 150 million funding in January from Ant Financial, as a part of the larger round, has only got USD 50 million till now and is yet to receive the remaining USD 100 million.
Sanjeev Bikhchandani, executive vice-chairman at an Indian internet company Info Edge, which is also an existing investor in the Gurugram-headquartered startup, told local media Economic Times (ET) that “the balance amount is yet to come,” and that it is being evaluated if the transaction would need the approval from the government authorities.
Ant Financial, an affiliate company of the Chinese e-commerce giant Alibaba, is the largest investor in Zomato with over 25% stake. Zomato had announced it has raised USD 150 million in January from Ant Financial, Info Edge, Sequoia Capital, and Temasek Holdings. It was a part of USD 600 million fundraise that Zomato founder Deepinder Goyal had kicked off late last year.
In April, India tweaked the FDI rules making it difficult for Chinese investors and corporates to invest in India. Companies hailing from countries that share a land border with India such as China are required to take government approval for any investment in the country. The move was aimed at blocking potential takeovers from China, after the People’s Bank of China, the country’s central bank, bought a 1.01% stake in Indian bank HDFC.
Bikhchandani said while the matter is being evaluated, the company has got inbound interest from other investors also “who don’t need permission.”
According to the ET report, Ant Financial was in the process of setting up a ‘unicorn fund’ and Zomato was supposed to receive the remainder USD 100 million from that fund. However, before that could materialize, the government had issued new FDI rules.
Meanwhile, it seems that in the absence of the required capital, Zomato will focus on its core business of food delivery, instead of grocery delivery which the company had veered into in April during the two months long lockdown.
This is in contrast with what Zomato founder Deepinder Goyal had said last month while announcing layoffs. “We see long term potential in this segment. Grocery also fits perfectly into our vision of better food for more people,” Goyal wrote in his blog. Goyal had then said he expects the number of restaurants to shrink by 25-40% over the next 6-12 months due to COVID-19.
“There was immediately a substantial hit…As restaurants come back, there has been a bit of a bounce-back, but still below what it was in February. Having said that, burn (losses) is substantially down,” Bikhchandani said.