Zomato acquires Uber Eats business in India in all-stock deal

Uber Eats app in India will discontinue operations and direct restaurants, delivery partners, and users of the Uber Eats apps to the Zomato platform, effective Tuesday, Zomato said in a statement.

The deal marks possible consolidation in the highly competitive and price-sensitive online food delivery market where most players are in the red.

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. The deal comes days after Zomato had raised $150 million in funding from existing investor Ant Financial, an Alibaba affiliate, at a $3 billion valuation.

Post money valuation of Zomato is $3.55 billion, sources in know of the matter said, adding this transaction will add to a total of over 50 million orders per month on its platform, giving it around 55 per cent market share.

“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,” Deepinder Goyal, Founder-CEO, Zomato said.

Uber Eats, which entered India in 2017, has about 26,000 restaurants listed on its platform from 41 cities. On accessing Uber Eats app, users were shown a message saying they can still use Uber Eats if they are travelling outside India.

Discussions between Zomato and Uber have been on for months. Facing stiff competition from Zomato and Swiggy, Uber Eats had been making losses. 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.

Uber Eats India business contributed three per cent of the global gross bookings but accounted for over 25 pc of adjusted EBIDTA losses for the first three quarters of 2019, sources said. With sale of the food business in India, Uber can now focus on the rides business and driving it towards profitability, a source said.

They also said 245 full-time employees of Uber Eats will be affected and some of these people could be absorbed in other roles in Uber.