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Uber Technologies sold stakes in Zomato

By News Canvass | Aug 04, 2022

Uber Technologies has sold its stake of 7.78% stake in Zomato in a bulk deal in which two institutional buyers Fidelity and ICICI Prudential Life Insurance brought the stakes.

  • Uber Technologies is 12 years old and was founded by Garrett Camp, a computer programmer and co-founder of Stumbleupon. Today the company has presence over 67 countries.
  • Uber Technologies was launched in India in the year 2013, since then it has served millions of riders and drivers. The car aggregator chose Bangalore as the first city to roll out its services.
  • Uber had said that in fast developing countries, like India, there’s a gap due to underdeveloped traffic infrastructure, which we think we can address.
  • Furthermore, the option of being able to driven around in a luxury car in Indian cities, by top class drivers, amidst the traffic and its hectic nature is quite an attractive proposition for Indians.
  • Uber Technologies invested around $ 247 million into India out of which major investment was into Uber Eats.
  • Uber Eats entered the Indian market in 2017 and scaled business to 41 cities with over 65,000 riders who deliver food from 26,000 restaurant partners.
  • But India’s hyper-competitive delivery market, funded by steep discounts and low value orders, has been a drag on the company’s financials.
  • Uber Eats, as an app, was first piloted in 2014 in Los Angeles. Interestingly, Uber’s entry into food delivery in India in January 2017 came at a time when homegrown food startups, barring a few, were cash starved and were forced to put expansion on hold.
  • In the year 2020, Zomato the online food delivery and restaurant Aggregator announced that it has acquired Uber Eats business in India. The deal said Uber will get a 9.99% ownership in Zomato.
  • Uber Eats in India got discontinued and operations and direct restaurants, delivery partners, and users of the Uber Eats apps moved to the Zomato platform.
  • The move was aimed at cutting losses at the ride hailing company’s food delivery business in India that has been a drag on the company’s earnings.

Zomato –The Online Food and Restaurant Aggregator

  • Zomato is an Indian multinational restaurant aggregator and food delivery company founded by Deepinder Goyal and Pankaj Chaddah in 2008.
  • Zomato provides information, menus and user-reviews of restaurants as well as food delivery options from partner restaurants in select cities.
  • Zomato was founded as FoodieBay in 2008 . The founders renamed the company Zomato in 2010 as they were unsure if they would “just stick to food” and also to avoid a potential naming conflict with 
  • Alibaba’s Ant Financial-backed online food delivery and restaurant discovery platform Zomato had acquired Uber Eats, the food delivery business of ride-hailing giant Uber India for around $350 million in an all-stock deal. The deal gave Uber 9.99% stake in Zomato. But Zomato failed to absorb Uber Eats employees.

Uber sells its stake in Zomato

  • Uber’s initial investment in Zomato was over $60 million. That amount was invested by Uber co-founder and CEO Travis Kalanick, who also serves as the managing director of the firm and chairman of its India unit.
  • The investment was valued at $200 million, making it one of the largest investments by a US-based tech startup in India.
  • Uber now has planned to sell a big block of shares in its Indian business – about 7.8% – representing around 29.8 million shares at a valuation of $274 million, or Rs 1,920 crore approximately. Zomato is currently valued at $1.4 billion and the sale would see it increase its market cap to $2 billion.
  • The deal values Zomato between $1.6-$1.7 billion, including the proportionate deal value of its remaining primary investor Info Edge, which owns 20% in the company. Zomato’s filing with Sebi also shows that it will use about $75 million to fund its food ordering platform Zomato Order and at least another $75 million towards other expenses mainly towards international expansion.
  • Zomato is still making losses but the company says that it will be profitable by next year. We already know that Zomato has been able to cut down its losses from Rs 871 crore in FY17 to Rs 614 crore in FY18. However, the company needs to continue its efforts if it wants to become profitable by next year.
  • Zomato has seen a lot of progress in terms of its financials and that has helped it gain a lot of love in the stock market. 
  • Since Zomato was first listed on the NSE, it has not seen too much success in terms of its financial performance. In fact, it has only been able to see its losses increasing every year. One of the primary reasons behind this is that Zomato has been trying to cut down costs while improving its offerings.
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