Ride-hailing company Uber has sold its food delivery business, Uber Eats, in India to its local rival Zomato for a 9.99% stake in the startup.
Uber decided to sell its Uber Eats food delivery business in India to startup Zomato, its local rival, for a 9.99% stake. The latest sale is part of Uber's initiative to shed underperforming ventures that have struggled against the competition.
This market exit follows the company's recent offloading of operations in Russia, China and Southeast Asia. However, Uber chief executive officer (CEO) Dara Khosrowshahi assured in a statement: "India remains an exceptionally important market to Uber and we will continue to invest in growing our local Rides business."
The deal will give Uber a 9.99% stake in Zomato, whose major investors include Alibaba affiliate Ant Financial. According to CB Insights, the startup was last valued at $2.2 billion.
In a statement, Zomato founder and CEO Deepinder Goyal said the Uber Eats acquisition "significantly strengthens our position" in India's food delivery market. Zomato is currently competing with local rival Swiggy, which is backed by Tencent, another Chinese tech giant, and is currently valued at $3.3 billion.
Uber Eats entered the Indian market in May 2017 but has been unable to catch up to its Indian rivals.
During the company's latest earnings call in November, Khosrowshahi said: "Our strategy for Eats is simple: invest aggressively into markets where we're confident we can establish or defend a No. 1 or No. 2 position over the next 18 months."
He mentioned that the company would  "get out" if that was not the case.  With investors expressing concerns about the company's history of steep losses and slowing growth, Uber reported a loss of more than $1 billion in the third quarter of 2019.
Following the sale, Uber Eats users will be redirected to the Zomato app starting on Tuesday. A Zomato spokeswoman said the companies are in the process of moving restaurants and delivery workers on the Uber Eats platform over to Zomato.
