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Zomato in talks to acquire start-up Runnr to strengthen food delivery business

The deal will give food technology start-up Zomato a captive fleet of delivery personnel, a model similar to its rival Swiggy.

business Updated: May 15, 2017 08:29 IST
Sayan Chakraborty
Sayan Chakraborty
Mint, Bengaluru
Zomato,Runnr,Food delivery
Zomato started food delivery services in May 2015.

Food technology start-up Zomato Media Pvt. Ltd is in advanced talks to acquire delivery start-up Runnr (Carthero technologies Pvt. Ltd) in a move that will help Zomato strengthen its food delivery business, two people aware of the development said.

The deal is likely to give Zomato a captive fleet of delivery personnel, a model similar to its rival Swiggy (Bundl Technologies Pvt. Ltd). While the final contours of the transaction are yet to be finalized, Zomato is likely to buy Runnr in an all-stock deal for about $20 million, said one of the two people cited above, on the condition of anonymity.

Zomato currently aggregates restaurants on its platform and works with third-party delivery partners such as Runnr and Grab among others to fulfil deliveries. The company had invested an undisclosed amount for a minority stake in Grab (Grab a Grub Services Pvt. Ltd) in September 2015 to strengthen the food delivery business.

Zomato started food delivery services in May 2015.

In a blog post in April, Zomato chief operating officer Surobhi Das said that the company clocked revenue of $9 million in the year ended 31 March 2017, an eight-fold growth over FY16. The company’s advertising revenue, its core business until it entered food delivery in May 2015, grew 58% to $38 million in FY17.

Zomato claims to have recorded 2.1 million monthly orders in March.

In comparison, its nearest rival Swiggy clocked revenue of Rs 23.59 crore (about $4 million) for the year ended 31 March 2016 from Rs 11.59 lakh a year earlier. Losses bulged to Rs 137.18 crore from Rs 2.12 crore in fiscal 2015, the company’s filing with the Registrar of Companies shows.

Zomato’s total revenue in 2016-17 rose 80% from a year ago to touch $49 million due to growth in advertisements and the food delivery business. Between December 2016 and March 2017, Zomato had reduced monthly cash burn globally to about $250,000, as against $4.2 million in March 2016, Mint reported on 7 April.

In May last year, HSBC Securities and Capital Markets (India) Pvt. Ltd slashed its valuation by about half to $500 million. Zomato had raised $60 million in September 2015 from Temasek and Vy Capital at a valuation close to a billion dollars. Overall, the company has raised about $225 million since inception in 2008.

Runnr, backed by Nexus Venture Partners, Blume Ventures and Sequoia Capital, has struggled to raise funds in the recent past. It has raised about $20-25 million since inception in 2015.

Runnr acquired Mumbai-based food delivery start-up Tinyowl Technology Pvt. Ltd in June 2016 and launched a consumer facing food delivery platform a couple of months later. The consumer-facing business has since been suspended.

“Runnr has significantly reduced cash burn to $300,000-500,000 per month. But they have less than six months’ cash left. The current market scenario is grim and it may be difficult to raise more,” said the first person cited above.

A Zomato spokesperson and Mohit Kumar, co-founder and chief executive of Runnr, did not respond to emails seeking comments.

First Published: May 15, 2017 08:23 IST