Swiggy-Uber Eats deal hits bump

Ride-hailing major Uber’s plans to sell its food delivery business Uber Eats in India to bigger rival Swiggy has run into rough weather because of tax and legal issues. The development comes even as there is a gap in terms of valuation expectations between the two rivals, said three people briefed on the matter.

“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 mentioned earlier. The transaction was being structured as a share-swap deal, with Uber taking shares in the buyer for the agreed-upon valuation ratio. The transaction had been in the works for the last three-four months. Uber Eats had also approached Zomato for the deal but talks had progressed with Swiggy, TOI had reported in its February 22 edition.

Uber Eats will have to restructure its business before the deal goes forward as it registers all international revenues, including from India, to Uber BV registered in Netherlands. In the current form, the deal could attract significant withholding tax implications on unrealised gains made by Uber, said one of the sources.

Another reason which is making both the parties nervous is the potential legal scrutiny by watchdog Competition Commission of India, as the combine would control a significant majority of the market share. The two companies had also not agreed to a valuation as Swiggy only wanted to dilute 10-12%, while Uber was looking for a 20-25% stake in the combine, said the sources. Swiggy was last valued at $3.3 billion when it raised $1 billion from South Africa’s Naspers and other investors.

“We don’t comment on rumour or speculation,” said an Uber spokesperson when contacted by TOI. Swiggy did not reply to emailed queries.

The transaction was expected to help Uber cut down loss from the India business as it heads for a public offering. Uber, which has already made a confidential filing with US regulators for an IPO, reported a loss of $1.8 billion for 2018.

India is one of the markets where Uber still sees high loss even as it has sold off operations in China, Russia and Southeast Asia to rivals. While there have been rumours of a potential consolidation with Ola, as both companies share SoftBank as the largest shareholder, these talks have not progressed. This has forced Uber to look at other alternatives.

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. Both Swiggy and Zomato are said to be losing $40-50 million each month as they offer discounts to customers and incentives to delivery personnel.

Source:-https://retail.economictimes.indiatimes.com/news/food-entertainment/food-services/swiggy-uber-eats-deal-hits-bump/68732678