VCs grab a bite of online food services market

Online train food services such as TravelKhana, Mera Food Choice, TastyKhana are attracting investors

Private equity (PE) funds may have abandoned most of the core sectors but the food services continues to be investors’ favourite. While PEs are exploring large investments in restaurant chains, venture capitalists (VCs) and angel investors are tapping the fast-growing market of online food distributing businesses.

The spotlight is on web portals that supply food in tier-I and tier-II cities, as well as to train passengers. Online train food services such as TravelKhana and Mera Food Choice, online food serving portal TastyKhana, and restaurant and event-listing site Zomato are on the radar of VCs and seed investors in India.

According to a study by Technopak Advisors, the Indian food service industry is a $14-billion market, of which the unorganised sector accounts for $12-billion. Quick service restaurants rule the organised sector with a 50 per cent share.

Saloni Nangia, president, Technopak Advisors, said, “As consumers need to eat out or call in at a high frequency, it is essential that the food is healthy, similar to home-cooked food and is comfortable on the pocket. Most of these portals are catering to this market with simple ‘home like’ menu options, a variety of offers and value pricing.” Two weeks ago, New Delhi-based Duronto Technologies, which owns TravelKhana, raised an undisclosed amount from Palaash Ventures. Another portal, Merafoodchoice, is in talks with strategic investors.

Tapesh Singhi, partner, Palaash Ventures, said, "The potential in this space is huge. Around 15 million people in India travel on long-distance trains each day. These travellers want to have good hygienic food, but there are not many good options available. These portals offer quality and convenience.”

Travelkhana.com and Merafoodchoice.com have tied up with over 200 restaurants in 100 cities. Pune’s Trinket Info Services, which owns TastyKhana.com, has partnered with Germany-based Delivery Hero and raised $5 million while PoshVine.com, a well-known player in the online restaurant reservation space, raised Rs 25 lakh from seed investor MyFirstCheque.

On the rationale behind launching Nashik-based Mera Food Choice, its promoter Piyush Kasliwal said: “Though hygienic food is not a concern for consumers in metros, passengers in tier-II, tier-III cities don’t have many options over quality and variety of food." Mera Food Choice, which supplies food in 150 stations, will add another 50 stations in the next six months.

Zomato is also reportedly in talks for fresh funding from Info Edge, which had invested Rs 55 crore in Zomato in February.

On exit options, Palaash Ventures’ Singhi said, “We see a lot of strategic sales, mainly because of the volatile capital markets and cumbersome governance on listing. Also, as the businesses and ideas are integrated, one or the other big player seeks synergies and expansion by buying.”

According to data from VCCedge, 64 PE and VC deals worth $714 million have taken place over the past three years in the Indian food sector. Portals offering online restaurant reservation and status updates such as Delhi-based TableGrabber, Tablewalla.com and Dineout are active players in food service area.