Uber sells its India food delivery business to Zomato in all-stock deal

The move is expected to catapult Zomato to the top slot in this space
Uber on Tuesday announced the sale of its food delivery business in India to Zomato in an all-stock deal.

Uber will get a 9.9 per cent stake in Zomato as part of the deal whose size has not been disclosed. The deal for Uber Eats, which operates in 41 cities, was signed at 3 am, and its customers will be shifted to the Zomato app from 7 am.

The deal is applicable only in India and Uber Eats will continue to operate in Bangladesh and Sri Lanka. According to sources the deal value is around $300- 350 million.

“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 Deepinder Goyal, CEO of Zomato.

Sources said the move is part of Uber’s strategy to be either number one or two in each of their businesses in every country they operate. In India, Uber Eats grew very quickly to take a 12 per cent share of the food delivery market. However, while India constituted for 3 per cent of the global gross booking of Uber Eats it also constituted for 25 per cent of its global EBITDA losses for the business segment. Intense competition in India’s food delivery market prevented India Uber Eats from taking either the first or second position, which are with Zomato and Swiggy.

The move to double down in India will help Uber Inc to improve the financials of Uber Eats.

Uber is concentrating on making its cab hailing business in India profitable and will expand of its network within the country from 50 cities to 200 cities this year.

“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, ” said Dara Khosrowshahi, CEO of Uber.

The move is expected to push Zomato to the top slot in this space, pushing down Swiggy.

Around 245 Uber Eats employees will be affected by the deal. However, sources in Uber India say they will be in the pay rolls till March 3 and that the company is making every effort to absorb some of them and provide support to the rest in finding jobs.

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