Zomato acquires Uber Eats India in all-stock deal for $350 Mn

After months of talks, online food delivery major Zomato has finally acquired Uber Eats India, the loss-making food delivery business of ride-hailing firm Uber.

The Gurugram-based firm has bought out Uber Eats’ India business in an all-stock transaction for reportedly about $350 million. The deal would give Uber 9.99% ownership in Zomato.

The buyout development comes after Zomato recently raised $150 million investment led by existing investor Ant Financial.

The acquisition will make the combined entity of Zomato and Uber Eats India command close to 55% market share in food delivery segment. Apart from cutting out a competitor, the deal would make Zomato single largest player leaving its rival Swiggy behind.

"This acquisition significantly strengthens our position in the category," said Deepinder Goyal, Founder and CEO, Zomato.

As per Zomato spokesperson, Uber Eats in India will discontinue operations and direct restaurants, delivery partners, and users of the Uber Eats apps to the Zomato platform.

Though, it would not absorb Uber Eats' team, reports ET.

Zomato did not comment on Entrackr's detail queries in regard to transacting amount and team absorbation.

For Uber, which had gone public recently, the ride-hailing firm aims to curb losses through the deal. The ride-hailing firm, in its last quarterly result, has marked that Indian food business has been costing them heavily. As per an estimate, Uber Eats has been losing about $15-20 million a month in India.

Started in May 2017 in India, Uber Eats claims to do around 1.5-2 lakh delivery a day with a gross sales run-rate of $200 million. It is reported to have over 30,000 delivery executives employed in 32 cities.

"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," said Dara Khosrowshahi, CEO of Uber.

The acquisition has brought Uber a long-term and strategic partner in Zomato in India. As per sources close to the deal, Uber could also bring Japan’s SoftBank close to Zomato that is yet to place its bet in the Indian food-tech space.

Earlier, Uber Eats held talks with both Swiggy and Amazon for a potential acquisition, but talks could not go further.

In April last year, the acquisition talks with Swiggy fell through over its valuations and share stake. Uber had insisted on getting over 20 per cent stake whereas Swiggy agreed to dilute only half of the claimed stakes by Uber.

Meanwhile, with this acquisition, food ordering and delivery will now turns into a duopoly in India. 

Is it good thing to have happened in Indian food space?

There is no denying from the fact that in some cases duopoly can have similar impact on the market as a monopoly. Especially when two players get to decide on market prices or listings. 

This will end up making consumers pay more than what it would normally get in competitive market. While the govt had failed to keep it from happening, will it do something to keep the competition alive in the market? 

As the time rolls on, we will come to know what is the stand of the govt and how duopoly will affect the Indian market.