Foodtech

Rebel Foods in Talks to Raise $120 Million in Fresh Funding Round Led by Temasek

• ByStartupStory     |    August 26, 2024

Rebel Foods, the Mumbai-based cloud kitchen startup behind popular brands such as Faasos, Oven Story, and Behrouz Biryani, is in advanced discussions to raise $120 million (approximately Rs 1,000 crore) in a fresh funding round led by Singapore’s Temasek, according to sources close to the development.

This latest round of funding, if completed, will mark a significant return of large-ticket investments in the Indian startup ecosystem. In recent months, several major startups like Zepto and Meesho have successfully raised substantial capital, indicating that while investor interest remains high, there is a growing trend of selective backing for companies with strong growth potential.

Rebel Foods is expected to raise this capital at a blended valuation of around $1 billion. Of the $120 million, about half will be in the form of primary capital, while the remaining will be secondary transactions, according to one of the sources cited.

In a primary round, the capital raised goes directly into the company’s accounts to fuel its operations and growth, while in a secondary transaction, company shares are transferred from one investor to another, with no new money entering the company.

Investors like Coatue and Lightbox are reportedly selling their shares in Rebel Foods at a valuation of $700-800 million, while the company is commanding a valuation of around $1.3 billion for its primary capital raise. This situation has resulted in a blended valuation of $1 billion, as explained by the sources.

Negotiations are still ongoing, and the deal’s structure may change as discussions progress.

When contacted, Temasek declined to comment on market speculation. Meanwhile, Rebel Foods denied being in advanced fundraising discussions. “We deny any advanced stage of fundraising conversations with (any) specific investor. Rebel continues to have preliminary discussions with investors and evaluate for any strategic partner in its next stage of scale-up journey,” a company spokesperson said in an email response to Moneycontrol on August 24.

This funding round will be reminiscent of the one Rebel Foods secured three years ago. In July 2021, the company raised over $100 million at a valuation of $1 billion, officially joining the unicorn club. Now, in August 2024, Rebel Foods is again raising more than $100 million, albeit at a slightly lower valuation.

Rebel Foods’ valuation had peaked at $1.4 billion through smaller rounds between 2021 and 2024 but has now recalibrated to around $1 billion, reflecting a broader trend among late-stage startups. Companies like Oyo have also seen significant valuation adjustments, with some raising funds at cuts as steep as 70% from their previous highs.

“Rebel’s round has been in the works for about a year now, and the company has reached a deal because it has managed to bring down its monthly cash burn thanks to belt-tightening measures like reducing workforce, reducing overall spends, etc., undertaken over the past year,” one of the sources said.

According to insiders, Rebel Foods’ monthly cash burn has been reduced from Rs 50 crore (roughly $6 million) in FY23 to about Rs 25 crore (around $3 million) currently. The company now boasts an annualized revenue run rate of $220-240 million.

In FY23, Rebel Foods reported a revenue of Rs 1,258 crore, marking a 39% increase from Rs 907 crore in FY22. However, the company also incurred a loss of Rs 657 crore in FY23, up 23% from Rs 534 crore in the previous fiscal year, as per data from Tracxn.

Offline Expansion Plans

While the primary capital from this round will be used for general business expansion, Rebel Foods is also eyeing a significant push into the offline retail space. The company plans to double down on its omnichannel strategy by expanding its physical presence with a goal of opening 100-250 physical outlets, according to various media reports.

Rebel Foods is also exploring the concept of an offline food court, where all its nine brands would be available under one roof.

This shift towards offline expansion is not unique to Rebel Foods; other cloud kitchen startups have also been moving into physical retail spaces as they seek to broaden their customer base and diversify their revenue streams.

Founded in 2011 by Jaydeep Barman and Kallol Banerjee, Rebel Foods competes with other cloud kitchen players like Binny Bansal-backed Curefoods and Tiger Global-funded EatClub. To date, the company has raised over $500 million, according to Tracxn data.

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