Zomato raises Rs 284 cr from Uber, Airbnb investor Glade Brook Capital

The funding would help Zomato compete with rivals such as Swiggy, Uber Eats and Ola-owned Foodpanda, which are also betting big on the online food ordering and delivery market in the country.

Online restaurant guide and food ordering startup Zomato has raised Rs 284 crore from US-based investor Glade Brook Capital Partners which counts companies such as Uber, Airbnb and Snapchat among its portfolio firms.

The financing is part of Zomato’s Series I funding round that started in November 2018 when Alibaba-backed Ant Financial invested Rs 1,539 crore in the New-Delhi based firm. Zomato allotted 13,000 ‘compulsorily convertible cumulative preference shares’ for Rs 2,18,790 per share to Glade Brook to raise the funding, according to regulatory documents filed by Zomato, which were sourced from business signals platform paper.vc.

The funding would help Zomato compete with rivals such as Swiggy, Uber Eats and Ola-owned Foodpanda, which are also betting big on the online food ordering and delivery market in the country.

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The online food ordering and delivery market is expected to grow at a compounded annual growth rate of more than 45% to reach $11 billion in gross merchandise value (GMV) by 2023, according to RedSeer Consulting, a research and advisory firm.

Founded by Deepinder Goyal and Pankaj Chaddah in 2008, Zomato said it provides in-depth information for over 1.4 million restaurants across 24 countries and serves more than 50 million users every month.

It has raised a total of $653.8 million in 11 rounds, according to Crunchbase. The firm is investing a lot of capital on technologies like artificial intelligence and data science as well as acquiring innovative startups to have an edge over its competitors. Last December, the company acquired drone start-up TechEagle Innovations, for an undisclosed sum. The acquisition would help it carve a path toward drone-based food delivery in India, creating a hub-to-hub delivery network powered by hybrid multi-rotor drones.

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From Swiggy to Foodpanda, online food delivery service firms face GST heat

Food delivery services are taxed at 18% which the restaurants have to pay.

Online food delivery service companies like Swiggy are facing the heat from restaurants after the goods and services tax (GST) on eating outlets was cut to five per cent, from 18 per cent in November, and input tax credit provision was withdrawn.

Some restaurants have started charging higher prices on online food delivery platforms. Others are negotiating a commission cut with online food delivery partners to make up for the 3.5 per cent additional cost due to unavailability of the input tax credit (ITC) facility.

Swiggy, Zomato and Foodpanda provide online delivery services to restaurants at a commission of around 20 per cent, which is levied an 18 per cent GST. Unlike earlier, restaurants can no longer claim ITC on the 18 per cent GST for the input services from these delivery platforms. “These online food delivery companies have represented for a rate reduction or to allow ITC to restaurants. The matter is being discussed," said a government official.

Swiggy, which holds about 60 per cent market share and delivers 450,000 orders a day, has approached the government for rate reduction to five per cent.
Food delivery services are taxed at 18 per cent, which the restaurants have to pay. But, they cannot now avail of any tax credit against input services.

A senior executive of a major online food delivery player said they had been under pressure from restaurants to cut margins by three to four per cent. He added other restaurants had, on their own, increased the prices on their platform. “We do not have an exact number but many restaurants are slowly increasing the prices on online delivery platforms, which is a setback,” he added.

Swiggy told Business Standard, "The high GST rate of 18 per cent on online food delivery service providers and ineligibility of credit of such GST charged to the restaurants could have an adverse impact on growth of the sector." A reduction in GST rates will keep food costs affordable and create more jobs in the sector, while furthering the government’s initiatives on Digital India, it added

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