UberEats Cashburn

The ride-hailing giant Uber is in talks to sell its food delivery service that is Uber Eats in India to its competitor Zomato as Uber is planning to infuse $100-200 million in fresh capital from its part of the sale of food delivery service. The fresh investment by Uber might be along with some other investment funds too. The deal will be reflected in the combined entity of Zomato and UberEats. The deal currently values at around $400 million.

Before this deal UberEats had been in talks with Swiggy earlier in 2019 for a deal, but it failed due to issues like tax implications. Prior, to that UberEats had unsuccessful deal talks with Zomato. But Zomato may not find it sensible to acquire UberEats without investing in the joint venture.

Even if the Zomato and UberEats manage to finalize the merger successfully, the company is likely to move way ahead of its biggest rival, Swiggy, in terms of volume. This deal is expected to consider the same valuation presently set by the current funding round led by Ant Financial and other investors.

In terms of competition UberEats never posed a real threat to Zomato and Swiggy both of which comprise more than 1 million orders each day.

 

Current scenario of UberEats comparative to Swiggy and Zomato

 

UberEats loses about Rs 50-80 per order according to the day of the week if it is running any promotional discount offers to its customers. Zomato and Swiggy, on the other hand, loses Rs10-30 per order this reflects that UberEats has a huge disadvantage as it has not adopted the first-mover advantage as done by Zomato and Swiggy earlier. This reflects the building blocks of loses being piled up over the years. This burn will be high for Zomato as well as there will be a lot of processes that have to be set right after this deal goes through.

 

Analysis of the deal

 

                              Source: ET

Zomato will be helped by UberEats to gain access to the southern Indian market where the company has not been able to make inroads unlike the north, which is its stronghold. Talks are going on that Zomato will use its own platform for premium restaurant deliveries and UberEats for mass-market deliveries as per the sources catered while gathering data.

This data shows that the share-swap deal is likely to be considered by Zomato’s $3b valuation. Moreover, the trend of average daily order numbers is quite low as compared to its other competitor’s average daily order given in the figure.

Let’s see how, when and at what amount this deal will be executed. If this merger goes through then it will surely be a giant in a leading number of orders in the online food industry.

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