INDIA – Uber’s plans to sell its Indian food delivery business, UberEats to rival Swiggy has been delayed as a result of tax and legal issues as well as other regulatory conditions.
An ET Retail report which cites three people familiar with the matter indicates that in addition to failure to meet certain market and regulatory conditions, the deal lacks in terms of valuation expectations between the two online food delivery platforms.
According to the report, the transaction was being structured as a share-swap deal, with Uber taking shares in the buyer for the agreed-upon valuation ratio.
As part of the conditions to be met before the deal continues, Uber Eats will have to restructure its business and register all international revenues, including from India, to parent company, Uber BV registered in Netherlands.
“The deal is stuck for now and may only proceed after Uber’s public offering in the next one-two months,” said one of the sources.
Another factor that is standing in the way of a possible deal is that in the current form, the deal could attract significant withholding tax implications on unrealised gains made by Uber.
There is also a potential legal scrutiny by watchdog Competition Commission of India given that combination of the businesses would create an entity with a majority market share in India.
The sources said that the two companies are yet to agree on the valuation as Swiggy only wanted to dilute 10-12%, while Uber was looking for a 20-25% stake in the combined business.
Uber’s decision to sell Uber Eats India was first announced in February as the firm looks to cut down loss from the India business as it heads for a public offering.
Uber, which reported a loss of US$1.8 billion for 2018 had made a confidential filing with US regulators for an IPO.
According to analysts, Uber was losing US$15-20 million a month in India late last year despite selling off its operations in China, Russia and Southeast Asia to rivals.
Uber is said to have also held similar talks with Zomato for the deal, but talks had progressed with Swiggy.
There were also speculations of a possible consolidation with Ola, as both companies share SoftBank as the largest shareholder, but with Swiggy in the picture could mean these were mere speculations.
Uber Eats had said last year that India is one of its fastest growing markets, and that it is adding 4,500 delivery personnel a week and 100 restaurants a day in the country.
