Zomato Buys Out Uber Eats In An All-Stock Transaction; Now Its Only Major Competitor Is Swiggy

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Online food delivery and restaurant discovery platform Zomato has acquired the Indian operations of Uber Eats, the food delivery business run by Uber, for around $350 million (Rs 2,485 crore). This is as per a report in the Economic Times.

Source: Real Estate Solutions Group

The all-stock transaction will give the US-based ride-hailing company about 10% shareholding in Gurgaon-based Zomato. Uber Eats will cease to exist as a separate brand locally and users on its platform will be redirected to Zomato’s app, said one of the people privy to the details. Zomato will not absorb Uber Eats’ team in India.

This means around 100 executives will either be reallocated to Uber’s other verticals here or laid off. 

First big move for consolidation

Zomato and Uber declined to comment when ET contacted them. The transaction, which has been in the works for more than a year, marks the first big consolidation move in the hotly contested and cash-intensive online food-delivery market, led by Swiggy and Zomato.

With the acquisition going through, the combined entity of Zomato and Uber Eats India is expected to corner more than a 50-55% market in terms of the number and value of orders, pulling it ahead of Swiggy. 

A Redseer report in December 2019 has pegged the combined Ubereats and Zomato market share at 52% and Swiggy’s  at 43% (Gross order Volume). Zomato expects 90% of Uber Eats’ users to transition on to its platform.

“For Zomato, buying the distant third player helps it consolidate the market and puts it ahead of its arch-rival Swiggy. It is one less competition for the company to deal with,” said the second person.

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“In parts of Tamil Nadu, Kerala, and Madhya Pradesh, Uber Eats has a stronger foothold compared to Zomato with an about 30% market share,” an Uber executive, who didn’t want to be named, told ET. The acquisition, therefore, will give increased access to Zomato in certain micro-markets, he said.

The Uber Eats buyout comes on the back of Zomato’s latest fundraising led by existing investor  Ant Financial, an Alibaba affiliate, which pumped in $150 million at a $3 billion valuation. There had been talks of Uber also participating in the recent funding with primary capital of about $100-200 million. However, those talks are on hold, said the two people. Uber which has underperformed the market after going public last year, has been shuttering or downsizing its loss-making units and geographies. 

With a cash burn of $20 million per month in India, the business was among the low-priority ones for the company. Last year, Uber said in its quarterly results announcement that the Indian food delivery business has been a drag for it.



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