Ola acquires Foodpanda to re-enter food delivery biz, takes on Uber Eats

India’s largest ride-hailing firm, Ola, has re-entered the online food-ordering and delivery business by acquiring Foodpanda’s India unit as it gears up to take on Uber Eats of global rival Uber and local outfits such as Swiggy and Zomato.

SoftBank-backed Ola is planning to invest $200 million (approximately Rs 1,300 crore) in Foodpanda India as it is looking to engage millions of users more often on its platform.

Ola had exited the on-demand food-ordering space in May last year, when it closed down its pilot, Ola Café. 

Rocket Internet-backed Delivery Hero, which owns Foodpanda globally, will get a minority stake in Ola.

“Our commitment to invest $200 million in Foodpanda India will help the business be focused on growth by creating value for customers and partners. With Delivery Hero’s global leadership and Ola’s platform capabilities with unique local insights, this partnership is born out of strength,” said Bhavish Aggarwal, co-founder and chief executive officer (CEO) of Ola, in a statement.

For Foodpanda India, the cash infusion will help the company take on Swiggy and Zomato, which have shown more robust growth over the past year.

Saurabh Kochhar, CEO of Foodpanda’s India unit, will move on to pursue other opportunities, with Ola’s founding partner Pranay Jivrajka taking over as interim CEO of the food-ordering company. Delivery Hero will continue to collaborate with Ola to build Foodpanda’s service in India.

“The partnership with Ola will allow us to further consolidate markets where it strategically makes sense to collaborate with leading local players. At the same time, we consider our stake in Ola as a very valuable asset, while Ola’s investment commitment in Foodpanda India is a clear and confident signal to the Indian market,” said Niklas Östberg, co-founder and CEO of Delivery Hero.

Foodpanda’s global operations were sold to Delivery Hero by investor Rocket Internet in December last year, a fallout of the bloodbath that the food tech space witnessed in India. Several start-ups in the foodtech space shut shop and many large firms cut costs and looked at profitability.

The German “start-up factory” continues to be the largest investor in Delivery Hero, which is valued at around $3.1 billion, with around a 37 per cent stake in the company.

For Ola, the acquisition opens up a channel to Rocket Internet, which is one of Europe’s most prolific venture capital investors. 

Foodpanda claims it has over 15,000 restaurants listed on its platform across 100 cities in India.

In comparison, Uber Eats is up and running only in Bengaluru, Mumbai, and New Delhi, and even in these cities its scale of operations is currently limited. While the company is offering deliveries at just Rs 1 in order to get more customers to order on its platform, it could take some time for Uber to begin capturing a sizeable chunk of the on-demand food delivery market here.

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. 

The food-ordering business was able to increase its revenues from Rs 37.78 crore in FY16 to Rs 62.16 crore in FY17, according to filings with the Ministry of Corporate Affairs.

In terms of scale, Foodpanda is one among the top three food-ordering platforms in India and, along with Ola’s backend logistic efficiencies, it could begin mounting pressure on Zomato and Swiggy. 

Even globally, ride-hailing, food-ordering, and other on-demand services are seen as converging due to synergies between these sectors.