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Uber is in advanced stages of talks to sell its food delivery service UberEats’ India business to local rival Zomato, as the American ride-hailing giant looks to cut its spending globally, three people familiar with the matter told TechCrunch.
The deal values UberEats’ India business at around $400 million, one of the sources said. As part of the deal, Uber may invest between $150 to $200 million in Zomato and get a sizable stake in the 11-year-old Indian firm, people said.
A spokesperson for Uber declined to comment on Saturday. A text to Zomato founder and chief executive Deepinder Goyal, who met Uber executives mid-last week, remained unanswered.
The deal comes at a time when Zomato is in final stages to close a new financing round of $600 million, Goyal told news agency PTI earlier this month. TechCrunch reported earlier that China’s Ant Financial was close to leading a financing round of up to $600 million in the 11-year-old firm.
Uber and Zomato are still negotiating the terms but the deal could finalize before the end of the year, people said. Indian newspaper Times of India first reported about Zomato and Uber’s talks last month.
If the deal goes through, it would mark the end of a year-long struggle for the U.S. giant that has had multiple conversations with both Zomato and Prosus Ventures-backed Swiggy to offload UberEats’ India business.
Uber launched its food delivery service UberEats in India in mid-2017. Even as the ride-hailing giant offered significant discount to customers, UberEats never posed a real threat to Zomato and Swiggy, both of which process more than 1 million orders each day.
In comparison, UberEats’ daily volume of orders peaked under 600,000, said one of the sources. Furthermore, recent quarters have been tough for UberEats, which saw two key executives — Bhavik Rathod (UberEats’ India and Southeast Asia head), Deepak Reddy (head of central operations for UberEats in India) — leave the firm.
During his visit to India in October this year, Uber chief executive Dara Khosrowshahi said the company remains committed to India, but avoided a question surrounding UberEats’ future in the nation.
In recent earnings call, Khosrowshahi has acknowledged that UberEats is facing tough competition in India but said that the company would continue to operate in the food delivery space.
“Right now the market is very, very competitive. There are a few very strong competitors there. Generally, I would tell you that we want to be the #1 or #2 in every single market. Right now in India, we’re the #3. And so the team knows there’s a big lift ahead of them, but we’re on the game,” he said in August.
The ride-hailing giant projected a negative revenue of $107.5 million for its UberEats business in India for the period between August and December of this year.
In recent months, Zomato has focused on reducing its burn rate on food delivery. The company, which as of last year was losing more than $40 million each month, has cut its monthly losses to $20 million, Info Edge, one of the investors in Zomato, told analysts in an earnings call last month.
Meanwhile, Swiggy continues to expand to more cities and explore delivery beyond food category. In a recent interview with TechCrunch, Prosus Ventures executives said they believe in long-term bets — a strategy — and the fact that it contributed $716 million in a $1 billion round in Swiggy late last year — that has helped the food delivery startup expand to more than 500 cities, up from fewer than a dozen cities three years ago.
Like Zomato and UberEats, Swiggy is also not profitable.
More to follow…
https://techcrunch.com/2019/12/15/ubereats-india-zomato/