Swiggy Will Acquire Uber Eats India: 3 Reasons Why This Recipe Is Delicious
Consumers can now get fewer discounts
Swiggy, which is India’s second food tech startup to get a Unicorn status, may soon acquire Uber Eats India, and complete their largest acquisition till date.
What is the catch here?
And why Uber Eats India will allow themselves to get acquired?
Swiggy’s Appetite Is Insatiable
As per an exclusive report by ET, India’s 2nd largest food tech startup, Swiggy, is in the final round of talks to acquire Uber Eats India, the food delivery service from World’s #1 cab-hailing app Uber.
As per insiders, this will be mainly a share-swap deal, wherein Uber India will get 10% of Swiggy, and will sell all their assets, and business operations to Swiggy.
At the last valuation, Swiggy was worth $3.3 billion. This means, Uber Eats India will be valued at somewhere near $330 million.
As per the people who are close to this deal, the negotiations have ended, and the paperworks are on. By the end of February, a formal announcement can be made.
Statements from both Uber and Swiggy stated: “We do not comment on rumour or speculation.”
3 Reasons Why This Deal Makes Sense
Reason #1: Avoiding Losses
Uber Eats India, right now, is getting around 9 million orders, and losing $25 million per month to maintain operations. On the other hand, Swiggy burns $40 to $45 million a month on maintaining their operations.
Instead of targeting the same restaurants, and same customers every month, it makes better sense to join forces, for Uber Eats India atleast.
A person close to the talks of this acquisition said, “It is prudent to be invested in Swiggy than burn capital competing for the same set of restaurants and consumers. This should bring some rationality to the cash-guzzling food-delivery market,”
Reason #2: Uber IPO
Probably by July, 2019, Uber wishes to launch their IPO in the stock market, and aims to raise $120 billion.
In order to entice investors, and shareholders in buying their stock, they will need to cut down their losses, and Uber Eats India makes perfect sense for the same.
By allowing Swiggy to acquire their Indian operations of food delivery, Uber Eats will save $300 million per year. And investors will love this as well. This converts to better chances of their IPO success.
Globally, Uber Eats is worth $20 billion, and in the 1st quarter of 2018, they generated $1.5 billion in revenues.
Reason #3: Consolidation In Indian Food Tech Market
Once Uber Eats India and Swiggy get merged, it will boost the theory of consolidation, which has been going on for some time now. After Ola acquired Food Panda, and then scaled down the operations, the path was paved for only two major players to fight the battle: Swiggy and Zomato.
Now, with Uber Eats falling into Swiggy’s lap, the fight between Zomato and Swigg will intensify, and more smaller players in this niche will get acquired.
Hence, consolidation is the only path in this sector now.
However, as per some reports, once Swiggy and Uber Eats India deal gets finalized, the consumers can suffer, as lesser discounts and offers would be rolled out now.
We will keep you updated, as more details come in.