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Uber is all set to sell off UberEats’ India business to Zomato

Talks of Uber selling off UberEats’ India business to Zomato is now in advanced stages, according to sources. Photo by Indranil Bhoumik/Mint on 3 May, 2017
Talks of Uber selling off UberEats’ India business to Zomato is now in advanced stages, according to sources. Photo by Indranil Bhoumik/Mint on 3 May, 2017

These talks are happening at a point where Uber is looking to cut down on global spending

Talks of Uber selling off UberEats' India business to Zomato is now in advanced stages, according to sources. The deal between the American ride-hailing giant and the local food delivery rival is happening at a point where the former is looking to cut down on their global spending.

The deal values UberEats' India business at $400 million, approximately and as a part of the deal Uber may invest between $150 to $200 million in Zomato and get a stake in the company.

Both Uber and Zomato have declined to comment about this so far.

While the talks are still on and terms are being negotiated, there are chances that the deal might be finalised before the end of the year.

At this point Zomato is also on the verge of closing a new financing round of $600 million according to founder Deepinder Goyal. According to an older report in TechCrunch, China's Ant Financial was close to leading a funding round of up to $600 million in Zomato at an evaluation of $3 billion.

If the Uber-Zomato deal comes through, it will mark the end of Uber's year-long struggle and multiple conversations with both Zomato and Prosus Ventures-backed Swiggy to offload UberEats' India business.

UberEats was launched in mid-2017 and the company had tried to woo customers with major discounts and deliveries from restaurants that were mostly not on Swiggy or Zomato. However, UberEats was never a treat to either Swiggy or Zomato, both of whom were processing more than a million orders every day.

In comparison, UberEats clocked a maximum of 600,000 orders in a day. Adding to UberEats' issues was also the fact that their India and Southeast Asia Head Bhavik Rathod and Head of Central Operations for UberEats in India Deepak Reddy left the firm.

When Uber's Chief Executive Dara Khosrowshahi visited India in October this year, he had mentioned that his company would remain committed to the country but avoided all questions about UberEats' future here.

"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," Khosrowshahi said in August.

At a New York Times conference last month, he pointed out that the company is "very clear that, with UberEats, we are either going to be No. 1 or No. 2 player in every country where we operate in the next 18 months — or we are going to get out."

However, in a recent earnings call, he acknowledged that UberEats was facing tough competition in India but suggested that the company would continue to operate in the food delivery space.

Uber has projected negative revenue of around $107.5 million for UberEats in India between August and December this year. And offloading the business here will allow Uber to reduce global losses. Uber also recently exited Southeast Asia and cut hundreds of jobs while reporting a quarterly loss of more than $1 billion in November. In the quarter prior to that, it had lost about $5.2 billion.

On the other hand, Zomato has been "reducing its burn rate". Last year it was losing more than $40 million each month and has managed to cut it down to $20 million, one of Zomato's investors Info Edge said in an earnings call last month.

Swiggy, in the meanwhile, is continuing to expand to more cities and is exploring delivery beyond food. Prosus Ventures executives told TechCrunch in an interview that they believe in long-term bets as a strategy and that it had "alone brought $716 million to a $1 billion round in Swiggy late last year — has helped the food delivery startup expand to more than 500 cities, up from fewer than a dozen cities three years ago".

Despite all of this, Swiggy isn't profitable either.

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