Ola buys Foodpanda India to get into food deliveries

Ola buys Foodpanda's India biz

Ola buys Foodpanda's India biz

Germany-based Delivery Hero Group on Tuesday announced the sale of its Foodpanda India business to Ola in return for shares in the Indian ride-hailing app. As part of the deal, Ola will also invest $200 million in Foodpanda India's operations.

The development, which came as a surprise to many analysts, is a strategic move by Ola to compete with arch-rival Uber's food ordering and delivery business Uber Eats, which the US-based multinational launched in India this May. In the interim period, Pranay Jivrajka, a founding partner at Ola will handle the responsibility of being the CEO of the business unit. However, according to industry sources, after Ola's business rival Uber unveiled UberEATS in India a few months ago, Ola's plans to enter the food delivery business heated up again - and the acquisition of Foodpanda is a step towards it. "Our commitment to invest $200mn in Foodpanda India will help the business be focused on growth by creating value for customers and partners", Ola CEO Bhavish Aggarwal said in the statement.

Niklas Östberg, CEO and co-founder of Delivery Hero AG, said the partnership will allow it to further consolidate markets. Earlier, in 2015, the company forayed into the food-tech space with a service named Ola Cafe, and started operations in Delhi, Mumbai, Bengaluru, and Hyderabad.

Saurabh Kochhar, CEO of Foodpanda India, will leave after the deal to pursue other opportunities.

Foodpanda, previously owned by Germany's Rocket Internet, was sold to its larger rival Delivery Hero, last year, after the German firm made a decision to reshuffle its portfolio of businesses.

To be sure, Ola and Uber are likely to face stiff competition from established players such as Swiggy and Zomato that have fought the downturn to emerge leaders in the nascent market.

While the companies did not divulge details of the deal, people in the know said Foodpanda was valued at $40-50 million. Ola and Delivery Hero will continue to collaborate on building the online food delivery ecosystem in India.

The platform, now available on both mobile (application) and desktop features over 15,000 restaurants from across 100 plus Indian cities, claims it has registered a profit on every order fulfilled and that it expects to be profitable in 2018-19. "At the same time, we consider our stake in Ola as a very valuable asset", he added.

While Ola will inherit a loss-making business from Delivery Hero, Foodpanda India has been able to cut its losses from Rs 142.63 crore in FY16 to Rs 44.81 crore in FY17.

Its revenue stood at Rs 62.16 crore in 2016-17 compared with Rs 37.81 crore in the previous fiscal, on the back of a strong growth in orders in key markets.

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