- The deal for Uber Eats, which operates in 41 cities, was signed at 3 AM, and its customers will be shifted to the Zomato app from 7 AM today, the report said
- Despite arriving in the Indian market in 2017, UberEats has not made enough inroads in the online food delivery segment
- By selling Uber Eats in India to Zomato, Uber can cut losses while taking a stake in a startup that was valued at $3 billion earlier this month, when it raised $150 million from Ant Financial
Uber Eats, the food delivery business run by Uber has been acquired by Zomato, the online food delivery and restaurant discovery platform in all-stock deal, according to news reports.
Uber will get a 9.9 percent stake in Zomato as part of the deal, said a report in Business Standard. The deal for Uber Eats, which operates in 41 cities, was signed at 3 AM, and its customers will be shifted to the Zomato app from 7 AM, the report said.
In a regulatory filing to BSE, Info Edge (India) a shareholder in Zomato—said its shareholding in Zomato will stand reduced to about 22.71 percent on fully converted and diluted basis upon closing of the transaction.
The deal comes days after Zomato had raised $150 million in funding from existing investor Ant Financial, an Alibaba affiliate, at a $3 billion valuation, according to a PTI report.
Uber Eats in India will discontinue operations and direct restaurants, delivery partners, and users of the Uber Eats apps to the Zomato platform, effective today, according to a blog post on Zomato website.
In the blog post, Deepinder Goyal, Zomato Founder and CEO said: We have acquired Uber Eats India and with this development, we are the undisputed market leaders in the food delivery category in India. 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.
Representational image. News18
Meanwhile, two people in the know told The Economic Times said the deal was for around $350 million (Rs 2,485 crore). The all-stock transaction will give the US-based ride-hailing company about 10 percent shareholding in Gurgaon-based Zomato, the report said.
According to a TechCrunch report last month citing sources, as part of the deal, “Uber may invest between $150 to $200 million in Zomato”, the report claimed, citing sources.
At an event in Delhi last month, Zomato CEO Goyal said the company is aiming to raise up to $600 million in a new funding round.
After concluding the acquisition, Zomato will continue to focus on the fiscal discipline, by cutting its burn rate and trim losses, said a person familiar with the matter, requesting anonymity.
Despite arriving in the Indian market in 2017, UberEats has not made enough inroads in the online food delivery segment, according to an IANS report. Zomato is currently delivering 1.3 million orders a day from 150,000 restaurants across India at more than 10 orders per restaurant per day.
Uber Eats, which entered India in 2017, has about 26,000 restaurants listed on its platform from 41 cities. Facing stiff competition from Zomato and Swiggy, Uber Eats had been making losses.
Uber had projected an operating loss of Rs 2,197 crore in its food delivery business for the five months through December 2019, according to a valuation report prepared by KPMG affiliate BSR and was part of regulatory filings.
According to sources, Uber Eats India business contributed three percent of the global gross bookings but accounted for over 25 percent of adjusted EBIDTA losses for the first three quarters of 2019, a PTI report said.
Swiggy has expanded its services to 500 cities in India, matching rival Zomato’s reach in the country. Swiggy, which has added 60,000 new restaurants in the past six months, said in October it would expand to 600 cities by December 2019.
Since April 2019, Swiggy has increased the number of restaurant partners by almost 1.8 times to 1.4 lakh restaurants currently. In tier-3 and tier-4 cities specifically, Swiggy has onboarded over 15,000 restaurants in the last six months.
The market is piping hot as according to a recent study by business consultancy firm Market Research Future, the online food ordering market in India is likely to grow at over 16 percent annually to touch $17.02 billion by 2023.
By selling Uber Eats in India to Zomato, Uber can cut losses while taking a stake in a startup that was valued at $3 billion earlier this month, when it raised $150 million from Ant Financial. Uber will continue to operate its ride-hailing business in the country, where it competes with a local rival, Ola, a report in The Indian Express said.
With the sale of the food business in India, Uber can now focus on the rides business and driving it towards profitability, one of the persons said to PTI.
Dara Khosrowshahi, CEO of Uber, said: “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. ”
Uber Eats was started in 2014 as a small delivery pilot in Los Angeles and launched as a separate application in Toronto in December 2015. Since then, it has grown as a stand-alone app available in 220 plus cities around the globe. In India, Uber Eats was first launched in Mumbai in May 2017.
The two local food delivery leaders in India, Zomato and Swiggy, were already well established and together controlled about 80 percent of the food delivery market. Zomato said the deal will add Uber’s 10 million in monthly food orders to its own 40 million, giving it a slight edge over Swiggy. In particular, the acquisition will bolster Zomato’s position in southern India, Swiggy’s stronghold.
Uber Eats never managed to attract many restaurants or customers in India, despite the company’s ride-hailing business. There was little synergy between the two businesses, since food delivery in India is done by motorcycle couriers, while rides are provided mostly by cars.
For the first three quarters of 2019, Uber Eats in India accounted for 3 percent of the gross booking for Eats globally and at least 25 percent of its adjusted operating losses, according to a person with knowledge of the finances who was not authorized to speak publicly.
Dara Khosrowshahi, Uber’s chief executive, told investors in a November conference call that he planned to make Uber Eats the primary or secondary food delivery service in every city where it operates. If the plan failed, “we’ll look to dispose or we’ll get out of the market,” he said.
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