On Tuesday, the ride-hailing giant Uber agreed to sell its food delivery business in India to its local rival, Zomato. As per the contract, Uber dropped the money-losing market to Zomato in exchange for 9.99 percent of the Indian start-up that would worth around $300 million.
Uber CEO Dara Khosrowshahi said in a statement, “Our Uber Eats team in India has achieved an incredible amount over the last two years, and I couldn’t be prouder of their ingenuity and dedication.”
“India remains an exceptionally important market to Uber, and we will continue to invest in growing our local Rides business, which is already the clear category leader. We have been very impressed by Zomato’s ability to grow rapidly in a capital-efficient manner, and we wish them continued success,” he added.
Ever since Uber Eats was first introduced in India in 2017, it has been facing competition from its Indian rivals. The company also stated that all the essential information about customers, including their phone numbers and older history, will be transferred to Zomato. The idea is also applicable for all the delivery drivers for the service known as Uber Eats. Additionally, for six months, the Indian users will be directed to Zomato whenever they click on the “Get Food Delivery '' button on the Uber app.
It will now become a bit easier for Uber to reduce losses while taking a stake in a start-up that was valued at $3.55 billion this month. However, Uber’s ride-hailing business also has a strong competitor in the country, that is Ola. Industry estimate says Uber is not the “clear category leader” in India, and the title belongs to Ola, which operates a double amount of rides in India compared to Uber.
The announcement comes amidst Zomato’s new financing round. Last month, Zomato raised $150 million from Anti Financial and is trying to secure another $400 million in the next few weeks. Uber has been under pressure as it had a loss of more than $1 billion last year. As a result, Uber Eats made an exit from Southeast Asia, cutting hundreds of jobs in November.
Uber also pulled its food delivery business from South Korea in September. It is likely to say, the purchase of Uber Eats business by Zomato will help the company to compete against local rival Swiggy. According to reports, Swiggy, which is backed by another Chinese tech giant Tencent, is valued at $3.3 billion.