US based ride-hailing giant Uber sold its Indian food delivery business – UberEats – to Zomato for $206 Mn, according to company’s latest regulatory filings.
Zomato acquired UberEats India business in January in all stock deal, with the latter acquiring 9.9% stake in the Gurgaon based company. However, back then both companies refused to disclose financial details of the deal.
The financial breakout of the deal is as follows: $171 Mn was the actual value of the deal while Zomato reimbursed $35 Mn in goods and services tax to the American ride-hailing company.
Two other major revelations have come also out from the regulatory filings: firstly, Zomato took major cut in its market valuation during the acquisition deal. Secondly, Uber does not enjoy the rights of primary investor in the company.
Gurgaon headquartered company’s decision to halve its valuation is bit surprising. It is indeed a matter of great curiosity that whether the company took this bold decision only for the sake of this deal.
As for Uber settling down as a non-primary investor then this is a clear case of desperate bargaining. As such, it was never a secret that the company was desperate to sell its loss ridden Indian food delivery business.
Being a non-primary investor means Uber won’t enjoy any preferential rights, for instance liquidation preference and right to information etc.
“Our ownership in these entities involves significant risks that are outside our control. We are not represented on the management team or board of directors of Didi or Zomato, and therefore we do not participate in the day-to-day management of Didi or Zomato or the actions taken by the board of directors of Didi and Zomato,” Uber said in its regulatory filings.
It is not going to be Duopoly for India’s foodtech industry
Many believed that Zomato’s acquisition of UberEats in January would mean that foodtech sector will become a duopoly affair, with Zomato and Swiggy becoming the two lone dominant players in the industry.
Duopoly would have herald a new chapter for this nascent but rapidly growing industry, which is expected to touch $8 Bn mark by 2022 with CAGR of approximately 25-30 percent, according to a report by Google and Boston Consulting Group (BCG)
However, all the prediction about duopoly went haywire, after last week Amazon unexpectedly announced its entry into India’s food delivery market.
What’s even more interesting, Amazon has joined hands with Indian IT veteran and Infosys co-founder N R Narayan Murthy for its Indian food delivery venture.