- Zomato, one of India’s largest food apps, today announced it has acquired Uber’s food delivery company UberEats in India through an all-stock deal.
- Zomato will not absorb Uber Eats’ team in India.
Zomato, one of India’s largest food apps, today announced it has acquired Uber’s food delivery company Uber Eats in India through an all-stock deal, giving Uber a 9.99 percent stake in Zomato. Uber Eats in India will cease operations and guide restaurants, delivery partners, and users of the Zomato platform’s UberEats apps, which are effective today.
The all-stock transaction will give about 10 percent shareholding in Gurgaon-based Zomato to the US-based ride-hailing company. Uber Eats will cease to exist locally as a separate brand and users on its platform will be redirected to Zomato’s app, one of the people told the details privy. Zomato isn’t going to absorb the Uber Eats squad in India. It means that around 100 executives will either be re-allocated here or laid off to Uber’s other verticals.
The transaction, which has been in the works for over a year, marks the first major move towards consolidation in the hotly contested and cash-intensive online food supply market, led by Swiggy and Zomato.
With the acquisition going through, Zomato and UberEats India’s combined entity is expected to corner more than a market of 50-55 percent in terms of the number and value of orders, pulling it ahead of Swiggy.
Uber Eats has a stronger foothold in parts of Tamil Nadu, Kerala, and Madhya Pradesh compared to Zomato with a market share of about 30 percent. Therefore the acquisition will give Zomato greater access in some micro-markets.
The Uber Eats buyout comes on the back of Zomato’s latest fundraising led by existing investor Ant Financial, an affiliate of Alibaba who pumped $150 million at a $3 billion valuation.
Deepinder Goyal, Founder, and CEO, Zomato, commented: “We are proud to have pioneered the discovery of restaurants and created a leading food delivery business in over 500 cities across India. This acquisition greatly reinforces our position in the category.”
Uber, who after going public last year underperformed the market, has shuttered or downsized its loss-making units and geographies. With a $20 million cash burn per month in India, the business has been among the company’s low-priority ones. In its quarterly results announcement last year, Uber said the Indian food delivery business has been a drag for it.
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 regulatory disclosures made in India. This loss was greater than expected from its core ride-hailing business, which, according to a valuation report prepared by KPMG affiliate BSR and released in November, was Rs 1,645 crore.
Uber chief Dara Khosrowshahi has been flagging analysts over the last six months during quarterly calls about India’s food delivery market being highly competitive and confessed to being the number three player in space.
In reality, the organization had begun its cutbacks since the beginning of last year. It had halved its annual cash allocation to India’s food-delivery business to $90-120 million which had a direct impact on the number of orders. Simultaneously, Uber’s India competitor Ola had also pulled his focus away from his food delivery company, Foodpanda, and started selling private brands on the marketplaces.
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 extremely important market for Uber and we will continue to invest in expanding our local Rides business, which is already the clear leader in the category. Zomato’s ability to grow rapidly in a capital-efficient manner has impressed us very much and we wish them continued success.
Uber joined the food delivery market in 2017 when Swiggy and Zomato had already roped in exclusive alliances in large restaurants and chains. To attract and retain customers Uber relied heavily on discounting. While it was able to establish market leadership in some small towns and cities, it continued to fight for market supremacy by the two larger food delivery companies.
