Indian food delivery app Zomato has acquired Uber Eats -- an online food ordering and delivery platform launched by a ride-hailing company Uber. Uber Eats sold its India business to Deepinder Goyal-led Zomato in an all-stock deal. With this deal, Zomato has emerged as the single largest player in India’s online food ordering and delivery space. Essentially, Uber benefits from 9.99 per cent stake in the joint venture.
As a result of this deal, Uber Eats has pulled the plug on its India operations effective Tuesday (January 21). But what does it mean for Zomato? We take a look. As of Tuesday, Zomato will see addition to its user base, courtesy of Uber Eats’ now-defunct India business. Although Zomato will no longer have competition from Uber Eats, Zomato still gets to keep all its users to its advantage though. Zomato clearly has more to gain, all credit goes to this merger-acquisition deal between Zomato and Uber Eats.
Let’s get one thing straight, competition in any sector or business is important to keep the industry healthy and functioning. The deal between Zomato and Uber Eats marks possible consolidation in India's highly competitive and price-sensitive online food delivery market. In a regulatory filing to the BSE, Info Edge (India) - a shareholder in Zomato - said its shareholding in Zomato will stand reduced to about 22.71 per cent on fully converted and diluted basis upon closing of the transaction.
Interestingly enough, the deal comes days after Zomato raised $150 million in funding from existing investor Ant Financial, an Alibaba affiliate, at a $3 billion valuation. Zomato’s valuation has reportedly reached $3.55 billion post-Uber Eats India acquisition, which is expected to result in an increase of more than 50 million orders per month on its platform, resulting in 55 per cent market share for Zomato.
Meanwhile, Zomato founder and CEO Deepinder Goyal 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.”
Uber Eats started its India operations in 2017. Uber Eats platform has about 26,000 restaurants listed on its platform spread across 41 Indian cities. However, Uber Eats app will continue to function outside India. It’s been quite some time since discussions between Uber Eats and Zomato over possible merger-acquisition were on. Uber Eats had been making losses, courtesy of stiff competition from Swiggy and Zomato.
Uber had projected an operating loss of Rs 2,197 crore in its food delivery business for the five months through December 2019, according to a valuation report prepared by KPMG affiliate BSR and was part of regulatory filings. With Uber Eats out of its plate (pun intended), Uber will be able to better focus on its ride-sharing business.
"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," Uber CEO Dara Khosrowshahi to said in the statement.
And here's how Twitterati reacted to Zomato-Uber Eats deal:
One way to look at it that UBER has a 10% stake in Zomato at the same valuation. Don't really know how many non-Zomato users were there with UBER eats, given it discounted heavily to lure existing category users.— Gabbbar (@GabbbarSingh) January 21, 2020
So Zomato was hungry and got Uber Eats which was in Sale !!. Must have applied some coupons as well. 😀— Prabhu (@Cricprabhu) January 21, 2020