Acquisition of Uber Eats

It’s been more than a week since the Indian startup ecosystem has witnessed one of the biggest acquisitions, as Zomato acquired Uber Eats’ India business. The Gurugram based food tech giant Zomato on 21st January, 2020 announced that it has acquired Uber’s food delivery business : Uber Eats in India in an all-stock transaction.With this, Uber Eats discontinues operations in India. It directs restaurants, delivery partners, and users of the Uber Eats apps to the Zomato platform. However, according to Uber global CEO Dara Khosrowshahi, the company will continue to invest and grow its India ridesharing and mobility business.

Uber has bought a 9.99 percent ownership in Zomato by selling its recent success in India. The all-stock deal, according to the Economic Times is worth $350 million, which values Zomato at $3.5 billion.

But why did Uber do this?

Simply because they were no more interested in burning cash in a business where the customers are loyal only to discounts. By selling Uber eats, the company could save around $750 million annually. Also Uber expects to recover the projected operating loss of 2197 crore in Uber Eats for the last five months.

Now, how is Zomato benefitted by this?

Zomato’s CEO and cofounder Deepinder Goyal said in an interview that the deal was a strategic investment to grow in cities, where Zomato is yet to conquer a great market. “Giving 10% stake for 20% more business is worth it” he says.

Besides, this consolidated acquisition has given Zomato enough leverage over its archrival Swiggy. It’s an example of Duopoly-when two firms dominantly control the market. The newest addion to this is the Zomato vs swiggy saga starting from the very moment of Cab aggregator Uber India’s sale of its food delivery business to Zomato. Till the date, Swiggy was ahead of Zomato in the business. This acquisition might give Zomato an extra edge in winning India’s hunger games.

Written by –

Kaushikee Banerjee

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