The ride-hailing company on Tuesday agreed to sell its food delivery business in India to local rival Zomato. It is just the latest exit for Uber (UBER), which has offloaded operations in Russia, China and Southeast Asia in recent years, as it makes good on a pledge to shed underperforming ventures that have struggled against the competition.
“India remains an exceptionally important market to Uber and we will continue to invest in growing our local Rides business,” Uber CEO Dara Khosrowshahi said in a statement released by both companies.
The all stock deal with Zomato gives Uber a 9.99% stake in the Indian startup. Zomato — which counts Alibaba (BABA) affiliate Ant Financial as one of its major investors — was last valued at $2.2 billion, according to CB Insights.
The acquisition of Uber Eats “significantly strengthens our position” in India’s food delivery wars, Zomato founder and CEO Deepinder Goyal said in the statement.
Zomato has been battling local rival Swiggy, which is backed by another Chinese tech giant: Tencent (TCEHY). Swiggy is valued at $3.3 billion, according to CB Insights.
Uber Eats launched in India in May 2017 and had been playing catch-up to its Indian rivals ever since. Khosrowshahi foreshadowed the India exit last year.
“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,” Khosrowshahi said during the company’s latest earnings call in November, adding at a conference a few days later that Uber would “get out” if that was not the case.
Uber has been under pressure to show a path to profitability, particularly since its high-profile IPO last May, with investors concerned about the company’s history of steep losses and slowing growth. It reported a loss of more than $1 billion in the third quarter of 2019.
In India, Uber Eats users will be redirected to the Zomato app starting on Tuesday. A spokeswoman for the Indian startup said the companies are in the process of moving restaurants and delivery workers on the Uber Eats platform over to Zomato.
— Rishi Iyengar and Michelle Toh contributed to this report.