- January 21, 2020 / 4 min readIn India, Uber Eats was not doing well and was not meeting its target of being number one or two in the business.
Zomato has bought Uber’s food delivery business, Uber Eats, in India in an all-stock transaction. This move will discontinue Uber Eats’ operations in the country.
With this deal, Uber gets a 9.99% ownership in Zomato. Uber Eats will direct restaurants, delivery partners, and users of its app to the Zomato platform.
The development is targeted at cutting losses at the ride-hailing company’s food delivery business in India that has been a drag on the company’s earnings.
Deepinder Goyal, Chief Executive Officer (CEO) of Zomato, said, “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.”
In India, Uber Eats was not doing well and was not meeting its target of being number one or two in the business. The company was losing business by around 20% of its EBIDTA margins and therefore decided to sell the business to Zomato. Uber Eats, however, will remain active in Bangladesh and Sri Lanka.
Dara Khosrowshahi, Chief Executive Officer, Uber, stated, “India remains an exceptionally important market to Uber and we will continue to invest in growing our local Rides business, which is already the clear category leader.”
“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. We have been very impressed by Zomato’s ability to grow rapidly in a capital-efficient manner," Khosrowshahi added.
On recent acquisition of Uber Eats by Zomato, Yagnesh Sanghrajka, Chief Financial Officer at 100X.VC, said, “Uber selling UberEats to Zomato is a sign of consolidation which happens typically to achieve leadership post companies achieving sizeable aggregation. Zomato now has more than 50% share in the food delivery market with this deal. The strength of the delivery network of UberEats will benefit Zomato in growing its market share in South India and hence compete more fiercely with Swiggy nationwide.”
“Startups addressing one major pain point, focusing on it full time to scale and achieve a certain level of critical mass becomes an important milestone and can help turn into a unique selling proposition for a larger player to strike a deal with them to increase its market share and hence create value and future exit opportunities for its investors,” he further stated.
Uber will now continue to focus on building its ride-hailing business in India where it competes with rival Ola.
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