Zomato’s Deepinder Goyal On The Math Behind Uber Eats Acquisition

Zomato’s Deepinder Goyal On The Math Behind Uber Eats Acquisition

SUMMARY

Zomato bought Uber Eats for $350 Mn this week

With this, Uber also got 10% stake in Zomato

Goyal said Uber Eats’ network is a big plus for Zomato in southern India

After cab-hailing giant Uber sold off its loss-making Uber Eats food delivery business in India to Zomato for $350 Mn, many observers have called it a bad deal for Zomato. Putting an end to it all, Zomato’s CEO and cofounder Deepinder Goyal said that the deal was a strategic investment to grow in cities, where Zomato didn’t have a strong market presence yet.

In an interview seen in the print version of ET, Goyal specified that it’s not about acquiring the third biggest player in the market, but about acquiring a business that holds the first or the second spot in many southern Indian cities.

“The idea is to only improve the quality of our business and Uber Eats was a step in that direction. It was not about buying a number three player, but buying a number one or number two is some cities where we were lagging behind,” Goyal said.

With this deal, Zomato is expecting to get 80% of Uber Eats’ business. Goyal said it would represent a 20% rise in monthly active users and 25% more orders. In reference to giving away 10% stake in Zomato to Uber as a part of the deal, Goyal replied that if the company had to give away 10% of its business to gain 20%, then it’s a “win-win” deal.

Besides this, Zomato will also be onboarding Uber Eats’ 500 exclusive restaurants, mostly from southern India, to tackle the surge in users it is expecting to get. Goyal had also specified that Zomato will introduce a different contract for restaurants, while Uber Eats’ contract will get transferred, but the new ones will need to be signed as well.

Uber Eats’ acquisition has helped Zomato become the largest player in the food delivery market. Even though, Uber Eats was at a distant third spot, it has given Zomato enough leverage over its archrival Swiggy.

Interestingly, Swiggy was also a contender to buy Uber Eats in India. Last year in February, Uber and Swiggy were in advanced talks, but the deal fell apart due to differences in valuation and other legal and taxation issues. Later, Uber had reached out to Amazon as well, which is looking to set up its food delivery business in India.

Goyal said that Zomato’s average order value is higher than competition’s and the discounts are lower as well. Therefore, he believed that Zomato’s business is better placed in terms of these metrics than Swiggy. Elaborating on the buyout, he said, “It was a competitive process, but we offered a price that was right for us. Uber, too, would have assessed which stock they should buy, and they took a strategic call on which company would give them more value.”

You have reached your limit of free stories
Become An Inc42 Plus Member

Become a Startup Insider in 2024 with Inc42 Plus. Join our exclusive community of 10,000+ founders, investors & operators and stay ahead in India’s startup & business economy.

2 YEAR PLAN
₹19999
₹7999
₹333/Month
Unlock 60% OFF
Cancel Anytime
1 YEAR PLAN
₹9999
₹4999
₹416/Month
Unlock 50% OFF
Cancel Anytime
Already A Member?
Discover Startups & Business Models

Unleash your potential by exploring unlimited articles, trackers, and playbooks. Identify the hottest startup deals, supercharge your innovation projects, and stay updated with expert curation.

Zomato’s Deepinder Goyal On The Math Behind Uber Eats Acquisition-Inc42 Media
How-To’s on Starting & Scaling Up

Empower yourself with comprehensive playbooks, expert analysis, and invaluable insights. Learn to validate ideas, acquire customers, secure funding, and navigate the journey to startup success.

Zomato’s Deepinder Goyal On The Math Behind Uber Eats Acquisition-Inc42 Media
Identify Trends & New Markets

Access 75+ in-depth reports on frontier industries. Gain exclusive market intelligence, understand market landscapes, and decode emerging trends to make informed decisions.

Zomato’s Deepinder Goyal On The Math Behind Uber Eats Acquisition-Inc42 Media
Track & Decode the Investment Landscape

Stay ahead with startup and funding trackers. Analyse investment strategies, profile successful investors, and keep track of upcoming funds, accelerators, and more.

Zomato’s Deepinder Goyal On The Math Behind Uber Eats Acquisition-Inc42 Media
Zomato’s Deepinder Goyal On The Math Behind Uber Eats Acquisition-Inc42 Media
You’re in Good company