In a move that is both tactical and forced in in some manner for Uber, the company is reportedly mulling a sale of its struggling food delivery business in India, to Swiggy. According to a TOI report published today, the company has finally decided to sell the franchise to some of its more than willing to buy rivals; Swiggy and Zomato.
Uber was originally a transportation related company but has since expanded its business horizons to various other businesses like; taxis, bicycle riding and food delivery. UberEats is one such expansion — which clearly hasn’t paid off — built on a model, already pioneered by home grown Zomato and Swiggy.
Although it has not been confirmed, sources claim that the battle of who ends up with UberEats between Zomato and Swiggy is turning to be favourable for the latter of the two. When finally conducted, the transaction will be set as a share-swap deal with Uber taking a part of the shares in the buyer for the concurred set value.
“Swiggy is currently leading the discussions but Zomato is in contention as well’ said one of the sources to TOI, adding that the valuation and share-swap values are in discussion as of now.
UberEats is currently the third most prevalent food delivery service in the Indian market with Swiggy at the top and Zomato following thereafter. But the number is to be taken with a pinch of salt, considering there are only 3 major pan-India players and being third of them does not sound too convincing. The most recent stats of the businesses are; UberEats with 150,000 to 200,000 deliveries a day and a gross sales run-rate of $200-250 million. Both Swiggy and Zomato procure almost 4 to 5 times that amount daily.
“The UberEats India business may get valued at two to three times their gross sales” said one of the sources who also added that the final valuation may be well over $500 million.
This buy-out, if it does happen, will be a relief sign for Uber. The company is aggressively gearing up for an IPO and is looking to shed all entities that may be a hindrance to the same. UberEats in India is one such entity. As per Uber’s latest financial data, the company generated $1.5 billion in 2018, but also reported a loss of around $1.8 million in the same year.
“UberEats was losing $15-20 million a month in India late last year” said an investigator who was tracking the space.
India is still one of the markets where Uber faces considerable losses even though it has sold major operations off to rivals in China, Russia and most of South-East Asia.
In the past year or so, Swiggy and Zomato have been gobbled up most of the capital that has been made available in the food delivery segment. That is pretty clear from stats as well. According to numbers, UberEats burns an average of around $25 million a month, while Swiggy burns about $45 million monthly.