Mobile Internet

Swiggy to acquire UberEats; Zomato might be in big trouble

Swiggy and Zomato's rivalry in danger

Swiggy is India’s largest food-delivery company. It has overtaken Zomato long ago and is one of the most trusted brands. The company is improving and expanding every moment and there is not a single month where it doesn’t lead in the delivery charts. Swiggy was founded in 2014, almost five years after its rivals Zomato. It was founded by three enthusiasts who looked at the market sooner than many people. It was founded by Nandan Reddy, Rahul Jaimini, and Sriharsha Majety. Reddy and Majety are alumni of BITS Pilani, they build Swiggy on their logistics business Bundl.

That said, the company has grown substantially over the last financial year. They have managed to receive funding of a billion dollars from various companies with South African giant Naspers leading the way. The company’s valuation shot up to a staggering $3.3 billion within a year’s time. This is how rapid their growth has been. The company is also looking to get into Artificial Intelligence so that it can improve the consumer experience. There are a lot of other things which the company is looking at.

However, there was nothing as shocking as what ET reported today. UberEats, a rival of Swiggy and the third best food-delivery company in India is going to be acquired by Swiggy. This comes as shocking news as Swiggy just bulked up by $1 billion and have invested in expansions. UberEats was also in the race but was way behind Swiggy and Zomato.

UberEats managed around 150,000-200,000 deliveries per day while Swiggy and Zomato manage multiple times more than that. Uber’s decision comes days after Ola decided to slow down its investments in Foodpanda. The reason, however, seems to be the same. The deliveries and the response of people go up when there are aggressive discounts but the response is mellow when the discounts dry up.

The pattern was repetitive and there seemed no way up as Swiggy and Zomato own a large market share. The duo delivers up to 29 million orders each every month and that is very hard to compete with. Uber, therefore, has been in talks with Swiggy over UberEats and it would be a direct swap of shares. Uber will have shares in Swiggy and Swiggy will gain complete control over UberEats. This is a huge step as Zomato might fall down the pecking order now.

Zomato was already under pressure when Swiggy raised $1 billion. It was trying to raise a similar number but has failed. This acquisition of UberEats will take them to a level where Zomato would not be able to compete with Swiggy. That is the reason this move is very helpful and might turn out to be a game-changer in the food-delivery business.

This is going to change a lot of things if it happens. Zomato’s second spot and the dream of overtaking Swiggy could just end then and there. Foodpanda will totally go out of focus. Zomato’s cash burns will reach a level of losses which might turn out to be fatal.

-Unmesh Phule

Comment here