India: Uber sells its Uber Eats to Swiggy

Uber Eats, the food delivery business of Uber, is gearing up to sell its Indian operations to Swiggy, a rival food delivery company in the country.

According to a report in The Economic Times citing three people privy to the development, the transaction is expected to close in March and would mark the biggest purchase for Swiggy. It also marks the first sale of Uber’s food business around the world. Under the deal, sources told The Economic Times, Uber will get about a 10% percent stake in Swiggy, which is valued at US$3.3 billion.

The move meshes with Uber’s aim to cut losses as it gears up for a potential initial public offering in the U.S. Uber Eats is valued at more than US$20 billion, bringing in revenue of US$1.5 billion in the first quarter of 2018 alone, noted the report. “It is prudent to be invested in Swiggy rather than burn capital to compete for the same set of restaurants and consumers,” a source told the paper. “This should bring some rationality to the cash-guzzling food-delivery market,” this person added, hinting that discounts are likely to significantly reduce post-integration.

Swiggy as well as rival Zomato have been successfully raising venture funding and have been aggressively pursuing customers. At the same time Uber Eats and Foodpanda, another delivery service, have been offering large discounts, which has resulted in the companies burning through cash to compete. Uber Eats, for one example, burned through about US$25 million on about 9 million orders a month, meanwhile Swiggy burns around US$40 to US$45 million a month. The paper noted Uber had held discussions with Zomato, but nothing came of it.

The sale of Uber Eats in India also comes as its rival Ola has pulled back on its food business, which operates under the name Foodpanda, and scaled backed marketing and customer acquisition costs by about two-thirds.