If this deal goes through, Oyo will be able to add online food delivery business to its portfolio, complementing its hospitality business.

Oyo eyes FoodTech space in talks to pick up significant stake in FreshMenu
Atom M&A Saturday, February 23, 2019 - 13:56

While Swiggy and Zomato have been battling it out in the food delivery space, they seem to have a new competitor from hospitality major Oyo Rooms. According to a Mint report, Oyo is looking at making a significant investment in cloud kitchen startup FreshMenu. There are just negotiations underway at this juncture and no finality has been reached.

FreshMenu has been seeking funding to the extent of $25 to $30 million and Oyo is flush with funds having raised about $1 billion, largely from the Japanese investor Softbank. For Oyo it may sound synergistic since it is consolidating its position in the hospitality sector and if you are running hotels you have to have a strong portfolio in the food department as well. Oyo’s spokesperson has confirmed as much, without commenting on the FreshMenu acquisition, that F&B already contributes about 25% of their revenue in the hospitality business.

Once they have the cloud kitchen under their management control, it might be a small step to start making deliveries and take on the biggies, Swiggy and Zomato. FreshMenu can also be used by OYO as the vehicle to expand the food operations to many cities.

Interestingly, as it is happening with many Indian startups, there is a common investor for both Oyo and FreshMenu who is trying to play the facilitator’s part: Lightspeed Venture Partners. Lightspeed had invested in FreshMenu in one of their first rounds, of $5 million in Series A. FreshMenu has been last valued in the range of $40 to $50 million. OYO is a giant in comparison carrying a valuation tag of $5 billion.

Things may play out once the talks conclude and the companies come to some kind of understanding. There is still an element of doubt on OYO’s plans to enter the food order and delivery space a la Swiggy and Zomato.

Become a TNM Member for just Rs 999!
You can also support us with a one-time payment.