By Preetika Rana
Uber Technologies Inc. agreed to sell its Indian food-delivery unit to a local rival, shedding a struggling business in a move that could steer the ride-hailing company toward profitability.
The deal with Zomato Media Pvt. Ltd has been under negotiation since last year and it was formally unveiled on Tuesday in India. It gives Uber a 9.99% stake in Zomato.
The deal comes as Uber Chief Executive Dara Khosrowshahi seeks a path to profitability for the San Francisco-based company after years of at times heavy losses. Last year, he said Uber would deliver an adjusted full-year profit for 2021.
In November, Mr. Khosrowshahi said the company would seek to be the No. 1 or No. 2 food-delivery operator in any market where it competes. If it can't reach that level, he said, it would exit the market.
Uber discontinued food-delivery operations in Vienna in March and, in September, it pulled out of South Korea.
Uber Eats launched in India in 2017. The company has since then spent heavily on discounts to compete with local rivals like Swiggy and Zomato, which was founded in 2008. Private-equity firm Sequoia Capital is a Zomato investor.
The Indian food-delivery business has weighed on Uber's earnings. Uber Eats in India generated 3% of the company's gross food-delivery bookings world-wide over the first three quarters of last year, according to a person familiar with the matter, but it accounted for more than 25% of Uber Eats' global adjusted losses.
Uber will continue to operate in India through its ride-hailing business, where it competes with ANI Technologies Inc.'s Ola.
"India remains an exceptionally important market to Uber and we will continue to invest in growing our local Rides business," Mr. Khosrowshahi said in a statement.
Uber's divestment in India comes at a time of global consolidation in the highly competitive food-delivery sector. In recent months, investor appetite for the deep discounts often required to fuel growth in the sector has soured and many are pushing to make their investments profitable. Shareholders of British food-delivery company Just Eat PLC earlier this month agreed to merge with Takeaway.com NV of the Netherlands. Last month, Germany's Delivery Hero SE agreed to buy a South Korean competitor for $4 billion.
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