Ola buying Foodpanda’s India business comes as a big relief for German tech incubator Rocket Internet

On Tuesday, homegrown cab-hailing service Ola announced it was buying Foodpanda’s India unit in an all-stock deal valued at $40 million. It will also invest $200 million to expand the food delivery business, in an attempt to take on rival Uber which had launched UberEATS in India in May. The deal includes all the assets of Foodpanda India.

In December 2016, Berlin-based online food delivery firm Delivery Hero had acquired Foodpanda and since then has pumped in Rs 50 crore in its India business, according to a report in The Economic Times. The deal value in stocks, after Ola completes the buyout, will eventually go to Delivery Hero.

 Ola buying Foodpanda’s India business comes as a big relief for German tech incubator Rocket Internet

Rocket Internet with an eye on big chunk of the online food delivery business had invested Rs 240 crore in Foodpanda India from January 2013 to December last year, according to the ET report. So far, both the companies have pumped in a total of Rs 290 crore in Foodpanda India. With Delivery Hero buying parent Foodpanda, Rocket Internet raised its stake in the food delivery company to 37.7 percent.

Meanwhile, the domestic ride-haling company Ola is trying to re-enter the online food delivery segment. Earlier, it had ventured into the business and started Ola Cafe but had to down shutters as the business did not turnaround. Apart from that, Ola wants to cash in on the big brand value that Foodpanda brings along with it. The foreign online food delivery company boasts of a vast network of outlets across the country and has been a major player in the segment. It has posted profit at a time when the business was staring at losses in revenue.

Even the incumbents -- big players Zomato and Swiggy – have had to bear losses at some point in their businesses. Given the circumstances in the online food delivery market, parent of Foodpanda India felt the urgency to look out for a buyer which ended on Tuesday with Ola pitching in.

With an eye on food business, Ola wants to beat the tough competition in the segment from its top rival Uber, the San Frnacisco-based company whose core business is providing app-based taxi service worldwide. Uber had started UberEats as part of its expansion on online food delivery business.

Faced with losses and its inability to turnaround the business, the German technology incubator was looking out for prospective suitors and ways to abandon its food business in India. Since 2012, the two companies set up by the Rocket Internet in India in the same year have shown rapid business growth. As a result questions were raised over business practices adopted by these companies to boost their sales.

These events led to Foodpanda co-founder Rohit Chadda’s resignation. With this, several senior management officials also put in their papers. Apart from that, Rocket Internet, also saw fall in Foodpanda valuation. Talks of shutdown amid efforts to sell the food delivery business in India did not make the ride any easier, according to the ET report.

Updated Date: Dec 20, 2017 13:35:19 IST