Zomato on Tuesday announced the acquisition of Uber’s food delivery business Uber Eats, in India, in an all-stock deal that will give the U.S.-headquartered ride-hailing services 9.99% stake in Zomato.
Effective Tuesday, Uber Eats’ operations in the country have been discontinued and users, along with restaurants and delivery partners are being directed to Zomato.
Uber, which is aiming to turn profitable by 2021, had launched Uber Eats in India in 2017, and has about 26,000 restaurants listed on the platform across 41 cities.
According to sources, while the Uber Eats India business comprised 3% of the global gross bookings for the company, it accounted for more than 25% of the company’s adjusted EBITDA losses for the first three quarters of 2019 amid stiff competition from Zomato and Swiggy.
Deepinder Goyal, founder and CEO, Zomato, said in a blog that delivery partners associated with Uber Eats India would be on-boarded to Zomato’s fleet. However, a source aware of the details said that there was nothing in the deal about absorbing the 245 executive-level employees. “This will affect about 245 employees. They will remain with Uber Eats till March. Some of them might be absorbed in some roles in Uber,” the source added. While the two companies did not share any financial details, the deal size is estimated to be about $300-350 million.
Stating that this acquisition significantly strengthened Zomato’s position in the category, Mr. Goyal said, “We have acquired Uber Eats India, and with this development, we are the undisputed market leaders in the food delivery category in India.”
He added that the competition in this space would continue to be intense and the food delivery category was still very small when compared with the overall food service market in India.
“This category will continue to grow and get built over the next couple of decades, as we work hand-in-hand with restaurants and food service providers to [deliver] better food to more people.”
A source added that the deal would enable Uber to focus on its core business. The growth in India will be driven by products such as Moto and Auto as the company looks to expand operations to 200 cities in India, from the current 50 cities.