The two companies announced that Uber has decided o sell its Indian food delivery business to Zomato by diluting a 99.9% stake.
The deal is finalized around $350 million leaving food delivery business a battle between two naming players, Zomato and Swiggy.
There was news that Uber is back and Zomato is a front runner to acquire it. Uber will not be investing in Zomato nor will it be on board seat.
Under the deal, Ubereats application will not be applicable in India and customers will be directed towards Zomato if they will login to Ubereats.
Zomato’s network range will surely get an add on of around 70,000 active delivery partners as a part of deal besides restaurants.
As Zomato has decided not to absorb the 200 employees of Uber eats India, some of the employees will be absorbed by Uber’s ride hailing business, others will be given out placement services, as said by one of the sources.
“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,” said Zomato founder and CEO Deepinder Goyal in a statement.
How the deal is beneficial for Zomato?
This deal will make Zomato’s market share to 52% as compared to Swiggy share of 43%. It will also strengthen its presence in the cities in South India against strong areas of Swiggy for December 2019.
As per the reports, Swiggy told that it has 60% of gross sales market share in the food delivery market.
Zomato is even planning to raise its capital and has already got commitment from existing backer Ant Financial for $150 million. The funding will make Zomato value account to $3 billion pre-money.
The investment is a part of $500-600 million being raised by Zomato to compete with Swiggy to attain leadership in food delivery business. The company is also in talks with investment banks Goldman Sachs and CLSA for raising capital.
Besides this, Zomato has also reduced its rate from $45 million in March 2019 to $20 million a month in October 2019 in last two quarters which has reduced to %15 million in recent months.
India’s online food delivery services have seen a drastic decrease in their business. Swiggy saw total loses of nearly six folds ie Rs 2,364 crore in FY19 and Zomato saw a jump of 24 times is from Rs 84 crores to Rs 2,058 crore in FY19 .Likewise Ola-owned Foodpanda bore 230% increase in losses from to Rs 756 crore.
Uber to concentrate on ride-haliing
After its exit from online food delivery business, Uber will double its services in ride-hailing to compete with rival Ola.
The Ubereats has shut down its services in South Korea in 2019.
Ubereats has discussed with Swiggy, Zomato and Amazon India before announcing its sale publicly in may. Although Swiggy and Ubereats had good discussion about the deal but the differences in valuation besides taxation and legal issues prevented the deal to get finalized.