With Zomato, the online food order delivery major looking to raise funds, Ant Financial may be willing to come up with the $500 million or at least a major portion of it. There is however a catch. The startup has two major investors Info Edge with around 33% stake and Ant Financial, the investment arm of the Chinese giant Alibaba with 23%. According to an Economic Times report, Ant financial is likely to place certain conditions before the investment is made. Ant Financial will want Zomato to work in close coordination with Paytm, the other Indian startup that they have funded.
Though not in the public domain, Zomato and Ant Financial had agreed in October 2018 itself that Zomato will operate within the Ant Financial ecosystem in India which meant giving priority to Paytm wherever synergies exist. This has been disclosed to the Registrar of Companies in the filings by Zomato but revealed now. Ant Financial has the veto rights on any decision taken by Zomato.
The situation Zomato finds itself in is not new or the first of its kind in India. There have been earlier cases of marquee investors like the SoftBank Group of Japan trying to throw its weight around and working on merger of two startups funded by it and so on.
In Zomato’s case, the matter went up to the extent of it getting integrated into the Paytm app but that was dissolved within few months.
It may be even more difficult to find an entirely new investor who will be willing to join in, knowing very well the two major stakeholders already in control and one of them calling the shots. The only options for such an investor could be picking up secondary shares and that must be acceptable to the board of Zomato and so on.
Everyone knows that the online food order business has turned into a cat and mouse game between Swiggy and Zomato. On the ground, there is very little to choose between the two, Swiggy and Zomato. Swiggy says it services around 1.2 million orders per day whereas the figure for Zomato is 1 million.
Incidentally, Swiggy too is keen on raising more funds. Swiggy’s valuation is being placed at $4 billion. The startup is also tapping its existing investors to make their follow-on rounds of investments.