Uber Technologies (NYSE:UBER) has agreed to sell its food delivery business, Uber Eats, in India to Zomato $172 million deal. This underscores the taxi-hailing company’s determination to cut on loss-making operations that have a struggle against the competition. In recent years Uber has offloaded orations in China, Russia, and South.
Uber to receive a 9.9% stake in Zopmato
In a statement, the company indicated that it chose to offload the Uber Eats segment in India in return for a 9.99% stake in Zomato. This effectively maintains the company’s foothold in one of the fastest-growing global internet arenas. As part of the agreement, Uber will close its operations in the country but will direct delivery companies, restaurants, and dinners to the Indian startup. The Indian start, whose value stands at around $2.2 billion, will offer Uber shares estimated at $172 million.
According to Uber CEO Dara Khosrowshahi, India is still an important market for the company. Although it is exiting the food delivery businesses in the country, Uber will nonetheless continue investing in growing its local Rides segment. Khosrowshahi added that over the last two years, the company’s Uber team had achieved significantly through their dedication and ingenuity.
Uber faces competition in India from all fronts
However, despite the deal, Zomato still plays second fiddle to local competitor Swiggy that serves more orders per day. Swiggy, which has backing from Prosus Ventures, raised around $1 billion towards the end of 2018.
According to industry projections, the US taxi-hailing company lags behind Ola in India in terms of local rides. Ola has almost double the number of rides Uber makes in India owing to its presence in around 110 cities compared to Uber’s roughly three dozen.
In recent times the company has been under pressure to shows its path towards profitability, especially since its IPO in May last year. Most investors have shown concern regarding the company’s huge losses and slowing growth. In the third quarter of 2019, the company reported a loss of over $1 billion. Therefore exiting the food delivery business might somehow help minimize losses.