Indian foodtech unicorn Zomato shuts down South African operations

SOUTH AFRICA – Indian food delivery startup Zomato has completed the processes of deregistering its South Africa subsidiary.

According to a filing with the Bombay Stock Exchange (BSE), the company declared that Zomato South Africa Proprietary (Pty) Ltd., its step-down subsidiary, ceased operations with effective from January 3, 2022.

The company initiated the process of dissolution in November 2021, claiming that Zomato SA was not material to its business and its dissolution would not affect its turnover or revenue.

 The move is part of the company’s “cleaning-up” exercise, with the food delivery firm shutting international subsidiaries that don’t contribute to its business since it was listed on Indian exchanges in July.

The start-up became the first Indian unicorn to go public, successfully raising over US$1.26 billion in an IPO that was more than 38 times oversubscribed.

By last year September, Zomato had closed down its subsidiary in the United States and sold its stake in Nextable Inc for US$100,000.

This is in addition to closure of its overseas subsidiaries – Zomato UK Limited (ZUK) in the UK and Zomato Media Private Limited (ZMPL) in Singapore. However, its UAE operations are still active.

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The company once saw its international operations as a key growth area, but revenues from overseas comprise a tiny portion of its earnings. 

According to its quarterly earnings report, filed in August, the company which is yet to turn profitable earned Rs 806 crore (US$110m) of its Rs 844.4 crore (US$115m) operational revenue from India, Rs 31 (US$4m) crore from the UAE, and the rest from other markets.

Zomato accelerates growth in India

Shifting focus to its home market, Zomato seeks to dominate India’s US$4.2 billion food delivery market, which is highly competitive but also very fragmented.

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The company plans to invest US$1 billion over the next two years to accelerate the growth of startups in India. 

Commencing the project, Zomato is set to make key investments in three companies — logistics aggregator Shiprocket, local shopping, and savings platform Magicpin, as well as fitness startup Cultfit, earlier known as Curefit. 

As part of the Cultfit investment, Zomato is in the process of selling fitness app Fitso to Curefit for US$50 million, a deal that will give the company a cumulative shareholding worth US$100 million in Curefit.

Sprocket is, on the other hand, getting a US$75 million investment for an 8% stake while Magicpin attracted an investment amounting to US$50 million for a 16% stake in the company. 

Zomato has now committed US$275 million across four companies, including investment in online grocer Grofers.

As part of investing in its core offering, the food delivery platform is also planning to inject US$50 million in the supplies business for restaurant partners, Hyperpure, in the next 18-24 months.

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