Zomato to invest US$1B over the next 2 years to accelerate growth of Indian startups

INDIA – Indian multinational food delivery company, Zomato has announced plans to invest US$1 billion over the next two years to accelerate the growth of startups in India.  

 To get the project started, the company has announced 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.  

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

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

Foray into quick-commerce 

The food delivery company’s CEO Deepinder Goyal revealed that a significant portion of the new funds will be invested in startups in the quick-commerce space.  

Quick commerce – sometimes used interchangeably with ‘on-demand delivery’ and ‘e-grocery’ – is e-commerce in a new, faster form where delivery is not in days but minutes – 30 or less. 

It tends to focus on the micro – smaller quantities of fewer goods and its proliferation in markets has expanded the breadth of what individuals can order, with perishable goods – like groceries – being a large niche q-commerce companies speak to.  

“We are investing in some really good founders and companies — all in synergistic or adjacent areas to our business,” Goyal said. 

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“We hope that over time, some of these companies and founders will choose to merge with Zomato to continue on their growth path. We are not asking any of these founders or companies for future M&A rights. We want chemistry to do the work here.” 

These investments, according to the company, are part of its long-term view where it is prioritizing three core areas — divesting non-core businesses, increasing focus on the core food delivery business to build an ecosystem, and finally investing in companies to tap into growth opportunities beyond food.  

Gross order value grows 

Meanwhile, Zomato has reported an increase in its transacting users as well as order value in the past quarter, a trend it has witnessed in the last year.  

Zomato’s gross order value grew 19% from the previous quarter to US$721 million, driven by an increase in the number of monthly transacting users, active food delivery restaurants, and delivery partners. 

 Zomato’s adjusted revenue in the second fiscal quarter stood at US$189 million, 22.6% higher compared to the previous quarter. 

The company’s monthly transacting users rose to 15.5 million from 12.3 million a quarter earlier while revenues from operations jumped to US$137.58 million in the quarter ended September 30 from US$57.23 million a year earlier. 

Losses however widened to US$58.4 million from US$30.76 million.

Zomato attributed the rise in loss to increased spending on branding and marketing for customer acquisition, higher investments and delivery costs going up due to unpredictable weather, and an increase in fuel prices. 

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