Online food delivery and restaurant discovery platform Zomato has acquired the Indian operations of Uber Eats, the food delivery business run by Uber, for around $350 million (Rs 2,485 crore), two people in the know of the deal said.
The all-stock transaction will give the US-based ride-hailing company about 10% shareholding in Gurgaon-based Zomato, they told ET. Uber Eats will cease to exist as a separate brand locally and users on its platform will be redirected to Zomato’s app, said one of the people privy to the details. Zomato will not absorb Uber Eats’ team in India. This means around 100 executives will either be reallocated to Uber’s other verticals here or laid off.
The Uber Eats buyout comes on the back of Zomato’s latest fundraising led by existing investor Ant Financial, an Alibaba affiliate, which pumped in $150 million at a $3 billion valuation. There had been talks of Uber also participating in the recent funding with primary capital of about $100-200 million.
The move by Uber is believed to rally the company forward towards dropping verticals that are loss making. The company went public last May, and has since then been working towards turning profitable.
The transaction, which has been in the works for more than a year, marks the first big consolidation move in the hotly contested and cash-intensive online food-delivery market, led by Swiggy and Zomato. With the acquisition going through, the combined entity of Zomato and Uber Eats India is expected to corner more than a 50-55% market in terms of the number and value of orders, pulling it ahead of Swiggy.
Deepinder Goyal, Co-founder and CEO, Zomato, stated that this acquisition would help the company strengthen its position in the country in the food delivery and foodtech space. “We are proud to have pioneered restaurant discovery and to have created a leading food delivery business across more than 500 cities in India. This acquisition significantly strengthens our position in the category,” Deepinder said.
However, Dara Khosrowshahi, CEO, Uber, stated that India would continue to be a significant market for the San Francisco-based ride-hailing company. “Our Uber Eats team in India has achieved an incredible amount over the last two years, and I couldn’t be prouder of their ingenuity and dedication. India remains an exceptionally important market to Uber and we will continue to invest in growing our local Rides business, which is already the clear category leader. We have been very impressed by Zomato’s ability to grow rapidly in a capital-efficient manner and we wish them continued success,” Dara said.
According to regulatory disclosures made in India, Uber had projected an operating loss of Rs 2,197 crore in its food delivery business for the five months through December 2019. This loss was larger than what was expected to be incurred by its core ride-hailing business, which was Rs 1,645 crore according to a valuation report prepared by KPMG affiliate BSR and released in November.
Uber entered the food delivery business in 2017 when Swiggy and Zomato had already roped in major restaurants and chains in exclusive partnerships. Uber relied heavily on discounting to acquire and retain users. While it has been able to establish market leadership in some small towns and cities, the two larger food delivery companies continued to fight for market leadership.
While Swiggy and Zomato are battling it out on one side, and the latter has acquired Uber Eats, Ola’s Foodpanda has rejigged itself into a dark kitchen model. Notwithstanding the ongoing slugfest between restaurant owners and food-delivery app companies like Zomato on their steep discounting model, this market is expected to be a $17 billion opportunity by 2023, recording an annual growth rate of 16 percent, according to a report by business consultancy firm Market Research Future.
You might also like
More from Featured
Bengaluru-based agritech platform Clover announced that it has raised $5.5 Mn in Series A funding round from venture capital companies …
Triton Investment Advisors, a Mumbai-based venture capital firm, has invested in an artificial intelligence- and deep learning-based startup that is …