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Uber sells its food delivery business in India to its rival Zomato

Michael Harris
  • January 21st, 12:30
  • Last Updated: January 21st, 12:31
  • Uber sells its unprofitable Eats unit in India to its rival Zomato.
  • Uber will now be able to sharply cut its losses while keeping a market share worth $15 billion by 2023.
  • Uber previously negotiated with Swiggy to sell its Eats unit in India.
  • Zomato says it is excited to have taken over Uber Eats and become the undisputed leader of Indian food delivery market.

The American ride-hailing service, Uber announced on Tuesday that its Indian rival in the food delivery business, Zomato, has successfully purchased Uber Eats. The move was directed at cutting losses as the food ordering unit remained unprofitable for Uber in the past quarters. Uber has now opted for a 9.99% stake in a new startup that is known to be supported by China’s Ant Financial.  

Uber Eats Remained Unprofitable In India Since Its Inception In 2017

Uber launched its Eats unit in India in 2017. In the past couple of years, Uber’s food delivery business failed to make its mark in the Indian market as it remained significantly behind its rivals, Swiggy and Zomato in terms of capturing market share. Both of its Indian rivals are known to be backed by China’s Tencent Holdings. Uber resorted to heavy discounts and deals in order to compete well in the market but as evident by its recent move, the strategy couldn’t work for it in India.

As per the specifics of the deal, Uber will now be able to sharply cut its losses while still keeping a market share worth $15 billion by 2023. As per Uber, its Eats unit in India contributed to as low as only 3% of the total global bookings. In terms of adjusted operating losses, the segment contributed to a quarter of it. An insight into the deal’s financial details, however, wasn’t publicized neither was a figure announced for Uber’s losses.

2019 remained a year of significant loss for Zomato and Swiggy as well with the former noting an annual loss of $294 million while the latter reported $330 million in losses. Following Zomato’s fundraising from Ant earlier this month, the company is currently valued at $3 billion.

Uber Had Previously Negotiated With Swiggy To Sell Uber Eats In India

As per the sources, Uber had been committed to selling its Eats unit in India for almost a year amidst the rising losses. In a previous estimate, Uber had expressed confidence in being a profitable business (operational level) by the start of 2022. Previously, Uber was announced to have been negotiating with Swiggy to sell Uber Eats in India, owing to the regulatory issues and lack of agreement regarding valuation, the deal couldn’t be closed.

While Uber and Swiggy have not responded to the recent development, Zomato commented that it is excited to have taken over Uber Eats as it will establish the company as the undisputed leader of the food delivery business in India. As of Tuesday, Uber Eats will no longer be operational in India.

About the author

Michael Harris
Michael Harris
I began trading in my early 20's at a local company and since then have combined my knowledge and love of content to become a news writer. I am passionate about bringing insightful articles to readers and hope to add some value to your portfolios!

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