Food fight set to heat up as Zomato buys Uber Eats in India

  • The all-stock deal allows Zomato to add Uber as a new investor to its shareholder roster as it battles Swiggy
  • Uber will get a 10% stake in Zomato in a deal that values Uber Eats at $300-350 million

Salman S.H., Mihir Dalal
Updated22 Jan 2020, 12:31 AM IST
The Uber-Zomato deal also signals maturity in the food delivery market with space for new firms dwindling, said analysts and investors
The Uber-Zomato deal also signals maturity in the food delivery market with space for new firms dwindling, said analysts and investors(Photo; Reuters)

Zomato Media Pvt. Ltd has acquired the Indian business of Uber Eats, the food delivery business of the ride-sharing giant, in an all-stock deal, adding a powerful new investor to its shareholder roster in its battle against arch-rival Swiggy for supremacy in India.

Uber will get a 10% stake in Zomato in a deal that values Uber Eats at $300-350 million, a person familiar with the matter said on condition of anonymity. In January, Zomato raised $150 million in fresh capital at a valuation of $3 billion from existing investor Ant Financial.

The Uber Eats app has been shut in India and the app now directs food delivery customers to sign up for Zomato. Delivery workers working with Uber Eats will also move to Zomato, the companies said.

Despite investing millions of dollars, Uber Eats had failed to make a dent in the food delivery market dominated by Swiggy and Zomato. Uber Eats had been looking for a buyer for at least a year, and the deal with Zomato is essentially a distress sale.

“This deal is a reminder for global companies and startups that in many industries, they are going to need a local player partnership to (play) the market better,” said Sanchit Vir Gogia, CEO of advisory firm Greyhound Research. “There is also a small slice of customers, who may have moved to Uber Eats due to bad experience with either Swiggy or Zomato. Now these users will be back with Zomato.”

Uber has seen its shares fall by more than 16% since it went public in the US last May. Despite starting out in 2009, Uber is still a loss-making firm. Its disappointing IPO has increased pressure on chief executive Dara Khosrowshahi to cut costs, especially in the food delivery business.

Khosrowshahi said in a statement that India “remains an exceptionally important market to Uber” and the company will continue to invest in its transportation business here. In ride hailing, Uber competes with Ola in India.

In food delivery, Zomato is locked in a bruising battle with Swiggy that has brought heady revenue growth at the two companies, but also led to heavy losses over the past three years. In the first half of 2019, Zomato and Swiggy were burning $50-60 million every month on discounts, marketing, logistics and other expenses.

Over the past six months, both companies have cut discounts. Zomato now burns closer to $20 million a month, Mint reported in October.

Though the acquisition of Uber Eats will not significantly boost Zomato’s market share, the addition of Uber as a shareholder may prove to be useful over the coming years, as a funding winter takes hold for internet startups.

The Uber-Zomato deal also signals maturity in the food delivery market with space for new firms dwindling, said analysts and investors.

“When any tech industry reaches maturity, there have been examples that it turns into a duopoly,” said Gogia.

Anup Jain, managing partner at Orios Venture Partners, said, “This is because large players in food and grocery delivery have already established market dominance in the space and they will continue to mop up a majority of the funding.”

Catch all the Business News , Corporate news , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.

MoreLess
First Published:22 Jan 2020, 12:31 AM IST
Business NewsCompaniesStart-upsFood fight set to heat up as Zomato buys Uber Eats in India

Get Instant Loan up to ₹10 Lakh!

  • Employment Type

    Most Active Stocks

    Tata Steel share price

    138.85
    02:25 PM | 13 NOV 2024
    -5.3 (-3.68%)

    Bharat Electronics share price

    281.40
    02:25 PM | 13 NOV 2024
    -8.85 (-3.05%)

    Tata Power share price

    400.25
    02:25 PM | 13 NOV 2024
    -14 (-3.38%)

    Tata Motors share price

    784.35
    02:25 PM | 13 NOV 2024
    -0.6 (-0.08%)
    More Active Stocks

    Market Snapshot

    • Top Gainers
    • Top Losers
    • 52 Week High

    Suzlon Energy share price

    54.60
    02:15 PM | 13 NOV 2024
    -4.79 (-8.07%)

    Rattanindia Enterprises share price

    62.60
    02:14 PM | 13 NOV 2024
    -5.35 (-7.87%)

    Gujarat Narmada Valley Fertilisers & Chemicals share price

    546.40
    02:15 PM | 13 NOV 2024
    -43.4 (-7.36%)

    Aditya Birla Real Estate share price

    2,539.00
    02:13 PM | 13 NOV 2024
    -173.6 (-6.4%)
    More from Top Losers

    Piramal Pharma share price

    260.15
    02:15 PM | 13 NOV 2024
    9.6 (3.83%)

    Suven Pharmaceuticals share price

    1,248.30
    02:13 PM | 13 NOV 2024
    44.55 (3.7%)

    KNR Constructions share price

    312.70
    02:14 PM | 13 NOV 2024
    28.55 (10.05%)

    Medplus Health Services share price

    689.10
    02:13 PM | 13 NOV 2024
    13.45 (1.99%)
    More from Top Gainers

    Recommended For You

      More Recommendations

      Gold Prices

      • 24K
      • 22K
      Bangalore
      76,865.00-440.00
      Chennai
      76,871.00-440.00
      Delhi
      77,023.00-440.00
      Kolkata
      76,875.00-440.00

      Fuel Price

      • Petrol
      • Diesel
      Bangalore
      103.02/L0.10
      Chennai
      100.90/L0.10
      Kolkata
      104.95/L0.00
      New Delhi
      94.77/L0.00

      Popular in Companies

        HomeMarketsloanPremiumMint Shorts