Uber had an agreement to sell its food delivery business running in India to Zomato in an all-stock deal by diluting a 9.99% stake to San Francisco. The company has fixed the deal around $350 million. This will become a battle between two online food delivery business i.e Zomato and Swiggy.
Under the terms of the deal, UbberEats will not be available in India and the user will be directed to zomato when they log in. Zomato will get 70,000 active delivery partners according to the deal.
The deal is attractive for Zomato, as it will help to strengthen its position in South India, which is a strong area of his rival Swiggy. As Swiggy told TOI last month that is has made a 60% gross sales market in the food delivery business whereas Zomato has reached up to 52% market share.
Zomato is bringing down its spending money rate over the last two quarters as it had come down by $20 million in October 2019 from $45 million in March 2019. With the exit from the food delivery business, Uber is now going to double his competition with his rival Ola. “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. We have been very impressed by Zomato’s ability to grow rapidly in a capital-efficient manner and we wish them continued success,” he added.
Uber earlier had talks with Swiggy, Zomato and Amazon for sale before making it public. Swiggy and Ubereats had a discussion related to deal but it did not go well due to differences in valuation besides taxation and legal issues. Uber has projected a loss of 1,451 crore for 12 month ending period December 2020. Some employees of Ubereats have given the option to join Uber and the rest of them will let go.