Online food delivery giant and the leader in restaurant discovery platforms Zomato has now acquired the Indian operations of Uber Eats, the food delivery business run by Uber, for a whopping amount of $350 million (Rs 2,485 crore).
This all-stock transaction will give the UBER about 10% of the shareholding in Gurgaon-based Zomato. One of the people privy said that Uber Eats will no longer exist as a brand and users on its platform will be redirected to Zomato’s app. It has been said that Zomato will not absorb Uber Eats’ team in India. This means that around 100 executives will either be reallocated to Uber’s other verticals or just be laid off.
The Consolidation
This transaction which is a surprise for most of us has been in the works for more than a year now, and now that it has been made, it marks the first big consolidation move in the online food-delivery market, led by Swiggy and Zomato.
Keeping in the acquisition in the account, the combined existence of Zomato and Uber Eats India is expected to cover up more than 50% of the pulling it ahead of Swiggy.
One of the people familiar with the matter said, “The deal is signed and customers are going to be directed away from Uber Eats to Zomato.”
“For Zomato, buying the distant third player helps it consolidate the market and puts it ahead of its arch-rival Swiggy. It is one less competition for the company to deal with,” said the second person.
“In parts of Tamil Nadu, Kerala, and Madhya Pradesh, Uber Eats has a stronger foothold compared to Zomato with an about 30% market share,” an Uber executive, who didn’t want to be named, made this statement. He also said that this acquisition, will give Zomato and increased access to certain micro-markets.
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This buyout came out after Zomato’s latest fundraising led by none other than Ant Financial, which is affiliated to Alibaba. It pumped in around $150 million with a $3 billion valuation. There had been whispers that Uber was also participating in the funding with a primary capital of about $100-200 million.
Uber, which has been underperforming the market after going public last year, was known to be downsizing its loss-making units. With a cash burn of approx $20 million per month in India, the business was amongst the low-priority ones for Uber. In fact, last year, Uber made a statement in its quarterly results that the Indian food delivery business was nothing but has been a drag for it.
As per the regulatory disclosures made in India, we came to know that Uber had somewhat projected an operating loss of more than Rs 2,197 crore in the food delivery business. This loss was larger than expected. Its core ride-hailing business, on the other hand, had incurred losses of more than Rs 1,645 crore as per the valuation report released in November and was submitted by KPMG affiliate BSR.
