Uber sells India food business to local rival Zomato to cut losses

Photo: Mint

Uber Technologies Inc. has agreed to sell Uber Eats in India to local rival Zomato, underscoring the U.S. ride-hailing giant’s effort to cut back on loss-making operations globally.

Uber will offload the business in return for 9.99% of the Indian startup, maintaining a foothold in one of the world’s fastest-growing internet arenas, the companies said in a statement. As part of the deal, the U.S. company will shutter operations but direct all restaurants, delivery companies and diners to Zomato. Neither company offered up financial details but the Economic Times reported that Zomato — which CB Insights last valued at $2.2 billion — paid its American counterpart about $350 million.

The deal marks yet another leg in a wave of consolidation sweeping the food delivery sector. Uber, which is trading well below its IPO price, seeks to hive off loss-making operations to achieve its goal of being profitable on an EBITDA basis by 2021. While it will continue to vie with Ola — also backed by SoftBank Group Corp. — in ride-hailing, exiting the food business can help staunch bleeding in one of the most competitive markets in the region. SoftBank founder Masayoshi Son has impressed upon the companies within his massive portfolio the need to curtail excess and focus on the bottom line.

“The competition in this space is going to continue to be intense, and the food delivery category is still very small compared to the overall food service market in India,” Zomato founder Deepinder Goyal said in a blog post. “Through this deal, Uber Eats India users now become Zomato users. I want to assure Uber Eats India users that their user experience won’t be compromised in any way – if at all, the scale gives us higher density to make our deliveries faster.”

Uber started its food-delivery business in India in 2017 with much fanfare and a huge marketing budget. The San Francisco-based company has since poured resources into the operations to lure users with bargain food deals delivered to the doorstep, but it’s pitted against competitors with powerful investors.

Bangalore-based Swiggy and Zomato, backed by Jack Ma’s Ant Financial, now lead India’s food-delivery sector, which like elsewhere is showing signs of consolidation. Bangalore-based ANI Technologies Pvt, which owns the Ola ride-hailing brand, acquired the Indian unit of Foodpanda in December 2017 and also faces an uphill struggle against the two established players.

Uber, whose shares are down 22% from their 2019 IPO price, said it will continue to expand its core Indian business after unloading Eats.

“India remains an exceptionally important market to Uber and we will continue to invest in growing our local rides business,” Uber Chief Executive Officer Dara Khosrowshahi said in the statement.

Bloomberg

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.