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Zomato puts TongueStun on its plate for $18 million

zomato

Zomato has acquired TongueStun Food, a Bangalore-based online food caterer and aggregator for corporate spaces. The deal was reportedly a cash-and-stock deal valued at $18 million. A Zomato spokesperson told MediaNama that the “capabilities” of the TongueStun app will be included within Zomato; and that the foodtech startup, which has so far focused on reaching individual customers directly, will follow the TongueStun model to cater to corporate workspaces.

Over time, we will also include the capabilities of the TongueStun app within Zomato, thus providing another very high frequency use case for our users – that is to order food for pickup from their cafeterias using the Zomato app.
…. with the help of TongueStun we hope we’re able to delight our users at their workplaces as well. This market is very high frequency, and customers are very sticky – as they end up placing more than 20 orders a month on the TongueStun platform.
— A Zomato spokesperson

TongueStun is a B2B caterer which partners with food companies and restaurants to provide meals for around 1500 clients. Deloitte, Accenture, Mindtree and Genpact are some of its corporate clients. It currently operations in six cities; Hyderabad, Mumbai, Gurgaon & Noida, Mumbai, Pune and Bengaluru. Zomato will absorb the full workforce of TongueStun and services for clients will continue per status quo.

TongueStun has so far raised less than $5 million from Uniqorn Ventures, which is a fund backed by investment bank O3 Capital, and Haresh Chawla, a partner at private equity fund True North, per ETtech. It was founded by Manjunath Ramakrishnan in 2012.

Zomato puts more on its plate

  • Zomato’s last significant acquisition was of logistics start-up Runnr for an undisclosed amount, although an ET report pegged the deal to be valued at $40 million. This was in September 2017, almost a year ago. The startup has also been expanding food delivery operations significantly, since July has expanded its presence from 17 cities to 28 cities, launching Tier II cities and larger towns such as Dehradun, Agra, Patna, Mysore, Ranchi, Raipur, Aurangabad, Surat, Vizag, Bhopal and Bhubaneswar.
  • In July, Zomato appointed former MakeMyTrip COO–Online Mohit Gupta as CEO of its food delivery business.
  • The firm’s subscription service Zomato Gold expanded to another three locations — Nagpur, Lucknow, Indore and Ludhiana — bringing up its presence from six cities to 14 cities in two months. The service is now available to 50% of the locations Zomato operates delivery services. Significantly, in July, rival Swiggy announced launched its own membership program — Swiggy SUPER. The company rolled out 1-month and 3-month subscription plans, with the current fee ranging from Rs 99–149 per month.
  • Zomato launched its loyalty reward points program Piggybank early this month for its food delivery segment.  Piggybank allows users to earn and use points for ordering food via the platform. Zomato has rolled out this programme to select users for free as of now, but going forward it will be converting this programme into a paid subscription program at Rs 299 per year. Zomato recently said that it crossed 200,000 member sign-ups within 48 hours of its launch.
  • In June, Zomato expanded its restaurant review and listings to 25 cities.

Financials

Zomato raised $150 million from Alibaba’s Ant Financial in February. Over and above this, Ant Financial bought another 6.66% stake (around 32,629 shares) of Zomato from InfoEdge for $50 million, taking the total expenditure for Ant Financial in this deal to $200 million. Zomato had reported revenues of Rs 481 crore ($74 million) for the financial year 2018 (FY18). While the company did reveal profit or loss numbers, it said that operating cash burn for the year fell to $11 million from last year’s $15 million and that it hit EBITDA break-even globally across all our business.

Investing company InfoEdge, which also runs JeevanSaathi.com and 99acres.com, has expressed positive outlook for Zomato. In the company’s investor call after Q1FY2019 earnings call, InfoEdge executives said that Zomato is “increasingly delivering more and more of  using its own delivery system, including runnr and less through third parties. Citing Zomato’s products like Gold and its most recent offering, Piggybank, the company said that the service has ‘apart from online ordering, it has a second, a third and a fourth leg.’ On competition with Swiggy, the company said that Zomato is expanding aggressively and that it not only expects the gap to narrow but also overtake it in the coming few months.

An earlier version of this piece incorrectly stated that InfoEdge runs Shaadi.com, which is in fact run by People Group. The error is regretted.

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