Uber, the US taxi service, sold its food distribution business in India to local rival Zomato for $206m,media reported. In January, Uber announced the sale of Uber Eats’ Indian business to Zomato, while acquiring a 9.99 per cent stake in the loss-making food distribution start-up. The two companies did not disclose financial details of the deal at the time, which some Indian news agencies had estimated at $350m.
TechCrunch has reported that Uber Eats’ “India operations” and Zomato’s 9.99 percent stake are valued at about $180 million.
Uber said in the filing that Zomato’s “fair offer” for Uber Eats’ Indian business was $206 million, including a $35 million “Zomato’s goods and services tax refund.”
The deal represents a sharp downgrade in the valuation of the 11-year-old Indian company. Zomato reportedly valued it at $3 billion earlier this year, when it disclosed $150 million in new investments.
Deepinder Goyal, co-founder and chief executive of Zomato, said in an interview with Indian media in December that the company was raising as much as $600m, but by the end of January. The company has yet to raise enough money. A Zomato spokesman declined to comment.
Uber Eats’ exit from the Indian market has made the local food distribution market the domain of the Zomato and Prosus Ventures-backed Swiggy. Swiggy raised $113 million in a fund-raising last month. Industry insiders believe Swiggy is India’s largest food distribution company.
Both start-ups are struggling to make a profit, and now they have to spend more than $15m a month to win new customers and maintain existing ones.
Red Seer, a Bangalore research firm, says finding a way to make a profit in India is challenging because in developed markets such as the US, the value of a single courier is about $33, while in India a similar single courier is worth $4.
Anand Lunia, a venture capital firm at India Quotient, said in a recent podcast that food delivery companies had no choice but to continue subsidizing food costs on their platforms or most of their customers would not be able to afford them.
It’s not the hardest. Soon, the two start-ups will face a strong new rival, TechCrunch reported last week that Amazon plans to enter India’s food distribution business as soon as the end of March.