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Zomato may Divest its UAE Business to Compete with Swiggy

Zomato is in talks to sell its UAE business to German based food delivery firm Hero Delivery, according to sources familiar with the matter. The Gurgaon headquartered firm is likely to rake in $200 Mn-$250 Mn with this deal as it looks to shore up the financial resources to take on its arch rival Swiggy.

Official logo of Zomato
Zomato may sell its UAE Business to Compete with Swiggy.

Zomato’s entry in UAE market in 2012 marked its first-ever foray into the international markets and since then has emerged as a lucrative region for the company. The region consistently accounted for nearly 20% of Zomato’s global orders. Although the company has refused to disclose the latest statistics for its UAE, it is widely believed that region’s average order value is lot higher than India.

Both Hero Delivery and Zomato are formidable players in UAE’s fast growing food delivery market, with each accounting for nearly 35%-40% market share. If this deal does materielze, Hero Delivery will surely become the undisputed market leader.

Hero Delivery once owned 1% stake in FoodPanda’s India business but later sold it to Ola in 2017.

Competition Getting Intense in FoodTech Sector    

Intense competition in India’s foodtech sector has caused fund raising frenzy among all the incumbent players, with Zomato and Swiggy leading this frenzy from the front. Both companies raised multiple fund raising rounds last year and are today among the proud unicorn companies of India.

Swiggy raised a whopping $1 Bn from Naspers in December last year, the biggest funding round that the Bengaluru based company has raised in its lifetime. This certainly had an unnerving effect on its close rival Zomato, which since then has been discussing with existing and new investors to raise $1 Bn.

While it is true that Swiggy and Zomato are wary about each other’s competitive potentials, both companies are as much cautious about the new entrants FoodPanda and UberEats. Although both new entrants are still far from achieving the dominant market share, their deeps pockets and easy access to financial resources has exerted extra-pressure on Zomato and Swiggy to continue with their fund-raising frenzy.

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