Zomato acquires Uber Eats in all-stock transaction

Zomato, the web food delivery, and restaurant aggregator platform, on Wednesday, announced that it’s acquired Uber Eats’ business in India in an all-stock deal which will see the ride-hailing company’s food delivery business being directed to Zomato starting today.

In a blog post on Wednesday, Zomato said the deal gives Uber a 9.99% ownership in Zomato. Uber Eats in India will discontinue operations and direct restaurants, delivery partners, and users of the Uber Eats apps to the Zomato platform, effective today.

The move is aimed toward cutting losses at the ride-hailing company’s food delivery business in India that has been a haul on the company’s earnings.

“This acquisition significantly strengthens our position within the category,” Deepinder Goyal, founder, and CEO, Zomato, said within the blog post. With Uber Eats, Zomato will now collectively have a 55% share of the food delivery market and compete largely with homegrown Swiggy. Zomato delivers to over 550 cities in India.

Delivery partners, who were earlier related to Uber Eats India, will on-board Zomato’s fleet, Goyal of Zomato said.

Close to 245 Uber Eats employees are going to be suffering from this deal. These employees won’t be absorbed by Zomato as a part of the transaction. Uber is trying to seek out ways to soak up them within its business here, said a source on the brink of the event .

The deal had been within the works for months, with widespread speculation over Uber’s decision to completely exit food delivery business in India as a response to mounting pressures on the ride-hailing company to curb losses especially after it went public in 2018. The move, said a source, is in line with Uber’s push to either be a dominant player in markets it operates or to exit the business.
Uber will instead still specialise in building its ride-hailing business in India where it competes with rival Ola.

“India remains an exceptionally important market to Uber, and that we will still invest in growing our local Rides business, which is already the clear category leader,” Dara Khosrowshahi, CEO of Uber said within the blog posted on Zomato’s website.

Uber Eats entered the Indian market in 2017 and scaled the business to 41 cities with over 65,000 riders who deliver food from 26,000 restaurant partners. But India’s hyper-competitive delivery market, funded by steep discounts and low-value orders, has been a haul on the company’s financials.

“Our Uber Eats team in India has achieved a fantastic amount over the last two years, and that i couldn’t be prouder of their ingenuity and dedication. we’ve been very impressed by Zomato’s ability to grow rapidly during a capital-efficient manner,” Khosrowshahi said.

Uber Eats as a brand won’t exist in India going forward, but the brand will continue operations in neighboring countries of Bangladesh, and Sri Lanka . Uber Eats, as an app, was first piloted in 2014 in l. a. . Interestingly, Uber’s entry into food delivery in India in January 2017 came at a time when homegrown food startups, barring a couple of , were cash-starved and were forced to place expansion on hold. A funding crunch since mid-2015 had impacted smaller, fringe players–forcing the likes of Spoonjoy, Dazo, Eatlo and Tinyowl to shut shop.

More recently, Ola decided to scale down the expansion of its Foodpanda delivery business that it acquired in 2017.

The deal marks yet one more round of consolidation in India’s thriving food delivery business where companies backed by large investors have struggled to seek out sustainable business models.

The competition during this space goes to still be intense, and therefore the food delivery category remains very small compared to the general foodservice market in India, Zomato’s Goyal said.

This category will still grow and obtain built over subsequent few decades, as all work hand-in-hand with restaurants and foodservice providers to supply better food for more people, he added.

This articale taken refrence from Livemint