As part of its efforts to cut its operating costs and losses, US ride-hailing giant Uber Technologies has now agreed to sell its food delivery business in India to its local rival Zomato. The company reportedly reached an agreement with the India-based restaurant aggregator for the latter to acquire its Uber Eats business.
Under the agreement, Uber will be acquiring a 9.99 percent stake in Zomato's business. The deal will essentially lessen Uber's operating risks in the region, while at the same time gaining it a share in the food delivery sector in one of the world's fastest-growing online marketplaces.
Uber mentioned in a statement that all of the restaurants, diners, and delivery companies on its online platform would be transferred directly to Zomato's own food delivery platform. Both companies did not immediately disclose any financial details regarding the deal, but reports have begged the deal to be worth somewhere around $350 million.
The US food delivery giant has long been trading well below its initial public offering (IPO) price and is continually struggling to keep its bottom line in the green. The company is however still adamant in achieving its goal of becoming profitable by 2021, which is likely why it had decided to shed off its less profitable global businesses. The company had stated that it will still be actively expanding its ride-hailing business in Asia and that shedding its food business should help it better manage its finances.
Zomato founder Deepinder Goyal stated in a blog post published immediately after the deal was made that his company would ensure that all of Uber's customers would have uncompromised service through Zomato's platform. Goyal added that all Uber Eats India users would now become Zomato users. He also stated that the merger should give Zomato the ability to make faster deliveries and to provide better services to all of its users.
Uber originally entered the Indian food delivery business in 2017, putting all of its weight into marketing and promotions. Despite pouring hundreds of millions of dollars into its business in India, the company still struggled to compete with other players that were backed by powerful investors.
Prior to the sale of its Uber Eats business, the company had lagged behind local competitors such as Zomato and Swiggy. Alibaba's Ant Financial backs both companies, with reports indicating a possible merger in the future. Bangalore-based ANI Technologies, which also operates the ride-hailing business Ola, also became a major competitor after it had acquired food delivery firm Foodpanda in 2017.
