Uber is in advanced stages of talks to sell its food delivery service Uber Eats in India to local rival Zomato as the American ride-hailing giant looks to cut its global spending, three people familiar with the matter told TechCrunch.
The deal currently values Uber Eats’ India business at around $400 million, one of the sources said. As part of the deal, Uber may invest between $150 to $200 million in Zomato and get a sizable stake in the 11-year-old Indian firm, people said.
A spokesperson of Uber declined to comment on Saturday. A text to Zomato founder and chief executive Deepinder Goyal, who met Uber executives last week, remained unanswered.
Uber and Zomato are still negotiating the terms, but the deal could finalize before the end of the year, people said. Indian newspaper Times of India first reported about Zomato and Uber’s talks last month.
The talks come at a time when Zomato is about to close a new financing round of $600 million, Goyal told news agency PTI earlier this month. TechCrunch reported earlier that China’s Ant Financial was close to leading a funding round of up to $600 million in Zomato at a valuation of $3 billion.
If the deal goes through, it would mark the end of a year-long struggle for the U.S. giant that has had multiple conversations with both Zomato and Prosus Ventures-backed Swiggy to offload Uber Eats’ India business.
Uber launched its food delivery service in India in mid-2017. Even as the ride-hailing giant offered major discounts to win customers, Uber Eats never posed a real threat to Zomato and Swiggy, both of which process more than 1 million orders each day.
In comparison, Uber Eats’ daily volume of orders peaked at 600,000, said one of the sources. Furthermore, recent quarters have brought more troubles for Uber Eats, which saw two key executives — Bhavik Rathod (Uber Eats’ India and Southeast Asia head) and Deepak Reddy (head of central operations for Uber Eats in India) — leave the firm.
During his visit to India in October this year, Uber chief executive Dara Khosrowshahi said the company remains committed to India, but avoided a question surrounding Uber Eats’ future in the nation.
In recent earnings call, Khosrowshahi has acknowledged that Uber Eats was facing tough competition in India, but suggested that the company would continue to operate in the food delivery space.
“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,” he said in August.
At a New York Times conference last month, he said the company is “very clear that, with Uber Eats, 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.”
The ride-hailing giant projected a negative revenue of $107.5 million for its Uber Eats business in India for the period between August and December of this year.
Offloading Uber Eats India would help Uber, which exit Southeast Asia last year, reduce its global losses. The company, which has cut hundreds of jobs this year, reported a quarterly loss of more than $1 billion in November. In the prior quarter, it lost about $5.2 billion. Uber says that it aims to become profitable by 2021.
Zomato, too, has been reducing its burn rate. The company, which as of last year was losing more than $40 million each month, has cut its monthly loss to $20 million, Info Edge, one of the investors in Zomato, told analysts in an earnings call last month.
Meanwhile, Swiggy continues to expand to more cities and explore delivery beyond the food category. In a recent interview with TechCrunch, Prosus Ventures executives said they believe in long-term bets, a strategy — and the fact that it alone brought $716 million to a $1 billion round in Swiggy late last year — that has helped the food delivery startup expand to more than 500 cities, up from fewer than a dozen cities three years ago.
Like Zomato and Uber Eats, Swiggy, too, is not profitable.