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CCI Looks Into Zomato-Uber Eats India Deal

CCI Looks Into Zomato-Uber Eats India Deal

CCI has reached out to Zomato seeking details about the transaction, the company has confirmed

Uber noted a pre-tax gain of $154 Mn through the sale of Uber Eats India

Uber also acquired 9.6% stake in Zomato as a part of the deal

Competition regulator Competition Commission of India (CCI) is reportedly reviewing the Indian foodtech giant Zomato’s acquisition of Uber Eats India businesses, especially after the Draft Competition (Amendment) Bill has emphasised on examination of such deals.

According to a Moneycontrol report, the competition’s watchdog is looking at two salient aspects of the deal. First, if it is anti-competitive, which would result in an impact on the customers. Second, if Zomato has notified CCI about the transaction earlier.

Zomato spokesperson has confirmed that CCI had reached out to the company, seeking certain “basic” information and clarifications about the transaction. “We believe this is customary to any merger and acquisition transaction in India; we have received similar information requests in the past on other transactions we have undertaken. We have responded to CCI accordingly,” the spokesperson added.

Zomato bought Uber Eats India operations for $350 Mn (INR 2,485 Cr) in an all-stock deal in January 2020. Uber also got a 9.6% stake in food aggregator Zomato as a part of the deal. According to the Ministry of Corporate Affair filings, Zomato in an extraordinary general meeting held on January 21, issued 76,376 shares at a face value of INR 9,000 with a premium of INR 1,80,153 each worth INR 1,375.93 Cr ($192 Mn) to Uber India Systems Private Limited.

Before the deal, Gurugram-based Zomato and Bengaluru-based Swiggy were leading the market, and Uber Eats India was a distant third. After the acquisition, Zomato took a giant leap, increasing the gap with Swiggy.

Later in an interview, Zomato’s CEO and cofounder Deepinder Goyal had highlighted that acquiring Uber Eats was a strategic investment to grow in cities, where Zomato didn’t have a strong market presence.

The deal allowed the food aggregator to onboard 500 exclusive restaurants that were a part of Uber Eats’ business, along with its customers. These restaurants and customers were mostly from southern India, where the Uber Eats had a stronger presence than other players. Besides, the Gurugram-based company was expecting a 20% rise in monthly active users and 25% more orders.

Meanwhile, Uber CEO Dara Khosrowshahi had highlighted that the company aims to be in the first or second position in the market it operates in, rather than being at the third or fourth spot. Therefore, it decided to sell the operations to Zomato.

According to Uber’s financial report for the first quarter of 2020, the company registered a pre-tax gain of $154 Mn through the sale of Uber Eats India operations to Zomato. Whereas, the transaction and related costs went up to $10 Mn between January to March quarter of 2020.