Singapore’s state investor, Temasek, is reportedly looking to invest up to $100mn in food delivery unicorn Zomato. The development was first reported by Economic Times on Tuesday, citing people familiar with the matter.
According to the report, the investment comes at a time when Zomato’s largest institutional stakeholder Ant Financial’s promised investment of $150mn has hit a road block due to the current anti-China sentiment in India and new Foriegn Direct Investment (FDI) rules.
The new FDI policy mandates prior government approval for investments by entities based in countries that share a land border with India. Hangzhou-headquartered Ant Financial is an affiliate of Alibaba Group Holdings and holds a 26% stake in the company. Out of the previously announced $150mn investment from the company, only $50 million has been invested so far.
An existing Zomato backer, Temasek’s potential funding is part of a larger investment round that the Gurgaon-based company has been negotiating since the end of last year.
The discussions between the parties are still ongoing, according to two sources aware of the developments.
“The round was almost finalised, but the terms of the deal are being renegotiated given the impact of Covid-19 on business operations, India’s investment policies and competitive landscape with Amazon’s launch (of its food delivery business),” said one of the people mentioned in the report.
“Covid-19 has hurt both the profitable listing and discovery businesses as well as the food delivery arm (of Zomato),” he said.
Temasek, which first invested in Zomato in 2015, has always been in the mix to pump in further capital. It holds a 3% stake, having invested Rs 310 crore into the company, according to data collated by Tracxn. The Deepinder Goyal-led company was valued at $3 billion in January. The valuation was, however, contingent on Ant fulfilling its commitment, said the report.
In April, Zomato raised $5 million from Pacific Horizon Investment Trust, a fund managed by British investment manager Baillie Gifford, as a part of its ongoing round.
Zomato, one of India’s most prominent startups, is one of many to lay off workers and reinvent parts of their business as they struggle to survive the economic fallout from the COVID-19 pandemic. Its main rival, Swiggy, has also laid off employees.
The anti-China sentiment has long been simmering in India over accusations of cheap imports flooding the country and on Monday, India banned a bunch of Chinese mobile apps targeting China in the online space since a border crisis erupted between the two countries this month.
However, both Temasek and Zomato have not given any confirmation regarding the development.
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