Online food delivery firms Swiggy and UberEats India have put their merger talks in mothballs after failing to reach a consensus on the financial terms and taxation clauses, Economic Times reported citing three people familiar with the development.
Uber’s existing investor SoftBank’s proposal to infuse primary capital at a reduced valuation in Swiggy also threw a spanner in the works, the sources told ET.
“Swiggy is valued ahead of its current food-delivery business, keeping new launches in mind. While UberEats is a third of the size of Swiggy in terms of order numbers, the price offered was not at par with the business. Also, taxation implications of the deal further complicated the process,” an investor in Swiggy told ET.
Swiggy is currently valued at USD 3.3 billion. Softbank’s attempts to broker a merger between Swiggy and its rival Zomato drew a blank last year.
Since UberEats India is viewed as a strong growth channel for the cab aggregator, selling it at a lower price could undercut its IPO prospects.
Dutch firm Uber BV owns UberEats India. UberEats is reportedly valued at USD 20 billion globally.
“All restaurants agreements and payouts are routed through the Netherlands. UberEats’ 120 India employees, however, are on the India company rolls, Uber India Systems,” the ET source said.
According to experts, transferring assets from Uber BV to an India incorporated company has its tax implications. The deal will cost more in the case of an indirect transfer since the underlying asset of the shares being sold are located in India and the gains from such a sale may be taxed in India.
“The deal talks have been called off for now because the two parties could not agree on what the breakup fee would be if the merger didn't go through,” said the source.
UberEats India was launched in May 2017 and is present in 37 cities. The firm has been seeing an exponential growth in its business in the country as more and more restaurants are breaking off exclusive tie-ups with rivals Zomato and Swiggy to incorporate UberEats as partners.