Ride-share giant Uber has sold its meal delivery business in India to Zomato, its prime local competitor here. The move is been seen as a part of its steps to achieve profitability.
India is one of Uber's biggest markets for rides, but its UberEats meal delivery service has struggled to keep up with the two largest online food-delivery players Zomato and Swiggy.
In exchange for the network of restaurants, delivery drivers and customers that UberEats has developed in India since 2017, Uber will receive 9.99 per cent of Zomato's capital, a press release said.
The statement did not specify the value of the Indian start-up. UberEats users will be redirected to Zomato starting Tuesday.
"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," said Uber CEO Dara Khosrowshahi in the press statement.
Uber, whose share price has tumbled since its public offering in May, is due to release its annual results on February 6. The group, which promised investors profitability by the end of 2021, has already cut expenses and shed more than 1,000 employees in 2019.
Its Uber Eats service is growing fast but faces intense competition in many countries.
Zomato's CEO Deepinder Goyal said in the statement that "this acquisition significantly strengthens our position in this category."
The app, which offers restaurant reviews and trial offers in addition to meal deliveries, boasts more than 70 million users per month.
The deal comes days after Zomato had raised USD 150 million in funding from existing investor Ant Financial, an Alibaba affiliate, at a USD 3 billion valuation.
"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," Zomato CEO Deepinder Goyal said.
Uber Eats, which entered India in 2017, has about 26,000 restaurants listed on its platform from 41 cities.
Zomato's restaurant discovery and food delivery platform has information for over 1.5 million restaurants across 24 countries and serves more than 70 million users every month.
Discussions between Zomato and Uber have been on for months. Facing stiff competition from Zomato and Swiggy, Uber Eats had been making losses.
Uber had projected an operating loss of Rs 2,197 crore in its food delivery business for the five months through December 2019, according to a valuation report prepared by KPMG affiliate BSR and was part of regulatory filings.
According to sources, Uber Eats India business contributed three per cent of the global gross bookings but accounted for over 25 per cent of adjusted EBIDTA losses for the first three quarters of 2019.
With the sale of the food business in India, Uber can now focus on the rides business and driving it towards profitability, one of the persons said.
With Inputs From Agencies: AFP/PTI?