The ride-hailing giant announced Tuesday that it sold its food delivery business in India to its rival Zomato in an all-stock deal. The transaction gives Uber a 9.99% stake in the Indian restaurant aggregator and food delivery start-up.
Uber Eats is now Zomato
Zomato is sponsored by Alibaba’s China-based affiliate Ant Financial, which recently showed its intent to invest up to about $150 million at a pre-money valuation of around $3 billion, as revealed by official filings from Zomato shareholder Info Edge.
Based on that valuation, Uber’s share in Zomato would be worth roughly $300 million. Uber claimed to comment on the deal’s value.
Uber East has confirmed that it will discontinue operations starting Tuesday and redirect restaurants, delivery partners, and consumers to the Zomato app.
“India remains an outstandingly important market to Uber, and we look forward to investing in raising our local Rides business, which has been a clear category leader,” said Dara Khosrowshahi, CEO of Uber.
The tech firm remained under pressure from investors to improve its operations. Last year, it disclosed a $5.2 billion loss in its second-quarter earnings and expelled hundreds of employees during 2019.
Uber will keep competing in the Indian ride-hailing market versus the start-up Ola. Previously, Uber left the ground in Southeast Asia and China to local players Grab and Didi Chuxing, respectively and exited its Eats business in South Korea.
Online food delivery market in India
With Asia becoming the largest market for online food delivery globally, revenues topped $45 billion in 2018 and are predicted to go over $100 billion by the end of 2025, according to a report from Frost & Sullivan.
China held the largest market share, around 73%, with India second at 13.2%.
The acquisition of Uber Eats is expected to bolster Zomato’s presence against its chief competitor, Swiggy. Naspers sponsors the latter and has tech behemoth Tencent and China’s Meituan Dianping as investors. Both firms have raised millions of dollars in capital, and they’re burning cash, offering steep discounts to consumers in a bid to capture more market share.
In its first-half report for fiscal 2020, Zomato revealed that its burn rate decreased to 60% compared to six months earlier. It didn’t provide more details.
Revenue totalled $205 million, growing from $63 million in the same period a year earlier.
Local reports described Swiggy’s parent company, Bundl Technologies, testified a six-fold escalation in losses for the fiscal year that ended in March 2019.