Uber has sold its online food-ordering business in India to local rival Zomato in exchange for a 9.99 percent stake in the startup. With the stock deal, Uber gets a 10% stake in Zomato. While the two companies did not share any financial details, the deal size is estimated to be about $300-350 million. Moneycontrol could not independently verify the report. It had earlier been reported that Uber Eats was having a hard time competing in India against its extremely popular rivals, Zomato and Swiggy.
Zomato said in a blogpost buying the Eats operations would make it "the undisputed market leaders in the food delivery category in India".
Zomato cofounder and CEO, Deepinder Goyal, also confirmed that the acquisition significantly strengthens Zomato's position in the category.
Uber Eats' will continue to remain a separate brand.
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With the sale of the food business in India, Uber can now focus on the rides business and driving it towards profitability. Uber, in its latest quarterly results, noted that the food delivery arm of the company had been a major drag for its revenue, with an operating loss of ₹2,197 crores for five months.
Swiggy had told TOI last month that it has a 60% gross sales market share in the food delivery market.
Uber Eats coming onboard with Zomato will surely give more firepower to take on rival food delivery App- Swiggy. While it will continue to vie with Ola - also backed by SoftBank Group Corp. - in ride-hailing, exiting the food business can help staunch bleeding in one of the most competitive markets in the region.
Correspondents say the deal will further intensify the competition between Zomato and Swiggy.
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Dara Khosrowshahi, chief executive officer 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".
This statement confirms that Uber Eats is shutting down operations in the country entirely, although you can still use the Uber app for cab booking as usual.
We have been very impressed.
Uber expects to see a gain of about $143 million, net of tax, as a result of the deal, according to the filing.
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"As global ride-sharing and food delivery markets mature, we expect Uber's profitability to increase over time and reach 6% Ebitda margin in 2024". In February 2019, Uber Eats was said to be in talks with Swiggy.