Foodtech Space Sizzles As Zomato On-boards Uber Eats India

The India Unicorn announced the acquisition of Uber's food delivery business in India in an all-stock transaction
Foodtech Space Sizzles As Zomato On-boards Uber Eats India
Image credit: Zomato Press Release
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The Indian foodtech space has become extremely competitive and attractive for players. While 2019 recorded million dollar fundings and launch of different features by the foodtech giants aiming to be the market leaders, the New Year has started with Zomato acquiring Uber Eats. 

The Gurugram-based foodtech Unicorn has announced the acquisition of Uber’s food delivery business, Uber Eats in India, in an all-stock transaction. This deal will give Uber a 9.99 per cent ownership in Zomato.

According to media reports, Zomato acquired the foodtech arm of the ride-hailing giant for $350 million (INR 2,485 crore).

“We are proud to have pioneered restaurant discovery and to have created a leading food delivery business across more than 500 cities in India. This acquisition significantly strengthens our position in the category,” Deepinder Goyal, founder and CEO, Zomato said in a statement on Tuesday.

This development comes right after Zomato raised $150 million funding from Alibaba affiliate Chinese investor Ant Financial at $3 billion valuation.

What Happens Now?

According to the official statement released by Zomato, Uber Eats in India will discontinue operations and will not exist as a separate brand. The users will now be redirected to the Zomato app, effective today.

Also, the Uber Eats delivery partners in India will also be on-boarded in Zomato’s fleet as a part of the deal.  According to Yagnesh Sanghrajka, Chief Financial Officer at 100X.VC, Zomato will now have more than 50 per cent share in food delivery market with this deal. "The strength of delivery network of UberEats will benefit Zomato in growing its market share in South India and hence compete more fiercely with Swiggy nationwide."

Commenting on the acquisition, Dara Khosrowshahi, CEO of Uber, said, “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. We have been very impressed by Zomato’s ability to grow rapidly in a capital-efficient manner and we wish them continued success.”

Increasing Market Competition

According to media reports, Uber Eats was placed at the third spot in the food delivery market in India which is led by Swiggy and Zomato. This acquisition deal will change the dynamics as it will give a major boost to Zomato’s user base.  Currently, Uber Eats is present in over 40 cities while Zomato operates in more 500 cities in India.

According to DataLabs report by Inc42, the Indian online food delivery space is expected to become a $12.53 billion market by 2023. As per industry estimates, currently foodtech giants Zomato and Swiggy together account for nearly 90 per cent of the market share. Swiggy leads with 48 per cent market share, followed by Zomato with about 42 per cent share.

Uber’s Previous Efforts To Offload Its Foodtech Arm 

Uber Eats began its operations in India in 2017. According to reports, the foodtech arm is said to have over 200 restaurant partners across 30 cities. In October 2018, it was reported that the company was completing around 3.5 to 4 million orders per month.

In February 2019, several reports revealed that Uber Eats was in talks with Swiggy for acquisition but the deal did not materialize due to differences in valuation and other legal and taxation issues. Later in July 2019, e-commerce giant Amazon was reportedly in talks to acquire Uber Eats India.

While the US-based cab-hailing giant had been looking to offload its loss-making food aggregator business, reports from November 2019 revealed that Zomato has been considering to acquire Uber Eats India.

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