Uber Eats India Sold to Zomato

Uber went public last year.

And, the stock price dropped more than 40% in a few months - mainly due to limited buying interest. Not many people are interested in a company that loses billions every year.

Going public creates pressure for performance. Uber’s financial results are now reported and analyzed every quarter. And, this might make any company short-sighted. 

But not Uber.

To achieve profitability, Uber didn’t shut down any of its R&D centres - Uber Elevate or Uber ATG (self-driving tech) - but got out of the highly competitive and unprofitable Indian food delivery market. 

Uber sold it’s Uber Eats India unit to rival Zomato. And, Uber’s stock price jumped. 

Uber now has a 10% stake in Zomato and following the sale, Zomato will become the market leader in the Indian food delivery category.

Food is a low margin business. When Uber Eats arrived in India back in 2017, it bled a lot of money and couldn’t stand against the incumbents (Swiggy & Zomato). 

“People familiar with the matter told Financial Times that the service’s operations in India only represented 3 percent of Uber’s food business revenue globally, but contributed to 25 percent losses in 2019 — almost $500 million a year.” - Ivan Mehta, TNW

That’s significant. 

“Uber would be EBITDA positive if it wasn’t also investing in Uber Eats, the freight operation and autonomous driving capabilities,” James Cordwell, Atlantic Equities analyst 

(EBITDA is basically a fancy acronym for 'Earnings before interest, tax, depreciation and amortization' or simply - how much cash is the company generating.)

Dara Khosrowshahi, Uber’s CEO, promised that the company will achieve profitability by 2021, so selling Uber Eats in India wasn't a surprise.