Zomato is reportedly offering to sell its online food order and delivery business in the UAE to its major rival Delivery Hero. Delivery Hero is a German company and along with Zomato, the two control over 40% of the market in the UAE and if the $200 million deal goes through, then the German company will get to be the dominant player there. Interestingly, it was from Delivery Hero that Ola purchased Foodpanda.
While both companies have declined to comment on this development, Economic Times reports that the talks are already on and the deal may be valued at around $250 million. From Zomato‚Äôs perspective, it is currently engaged in a serious business rivalry with Swiggy, the other food order delivery startup that has a much higher valuation than Zomato in India and has been able to attract larger blocks of capital investment as well. The two majors are burning huge cash running into millions each month in order to retain their existing customers and to garner more market share from each other. The smaller players like Uber Eats and Foodpanda, the food delivery arm of the app-based cab aggregators Uber and Ola respectively are not making it easy for their parent companies either. It is reported that the $200 million stake sale in the UAE business is being seen as one way of funding for Zomato.
Alibaba‚Äôs investment arm Ant Financial is a major investor in Zomato and a separate exercise is on to raise further capital from the same source, but the founder is wary of allowing too much concentration of stakes in the hands of a single investor. The augmenting of funds through the UAE stake sale and bringing in new investors could be the choices for Zomato.
Global investment banker Goldman Sachs has been mandated with the task of roping in new investors, it is learnt. Apart from the competition in the business with Swiggy, there has been the race between the two on raising funds too. And even here Swiggy has been more successful with the latter getting over $1.3 billion against $410 million by Zomato.