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Ola to buy Foodpanda India to expand food delivery business

Acquisition to help Ola take on Uber Eats

Ola invests $200 million in Foodpanda.   © Reuters

MUMBAI (NewsRise) -- Indian ride-hailing service Ola has agreed to buy the local operations of food delivery start-up Foodpanda in an all-stock deal, seeking to fend off the dominance of rival Uber Technologies' Uber Eats in the south Asian country.

As part of the deal, Ola will invest $200 million in Foodpanda, the Indian company said in a statement Tuesday.

The entry of Ola, backed by ANI Technologies, into delivery business comes at a time when online food ordering is growing in India. Uber launched Uber Eats in India in August after having tested the market more than three months ago. The company, which began the service in Bengaluru in southern India, had then said it plans to expand into six more Indian cities in six to 12 months. Earlier this year, Google started a food delivery and home services app in India called Areo.

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

Both Ola and Uber are locked in a high-stakes battle for leadership in India's fast-growing cab-hailing market. In their quest to grab market share, both the companies have been diversifying into a number of new businesses including e-wallets, car-pooling, and two-wheeler rides.

This is Ola's second attempt to enter the food delivery market in India. The company had started a venture called Ola Cafe back in 2015, though it shut down the business last year.

The flip-flop came as the food technology sector in India went through a struggle, amidst stiff competition and a funding crunch that saw many companies shutting down or trimming their 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.

According to Jefferies, Zomato is currently processing 2.5 million orders per month in India, while Swiggy, the market leader, is clocking 3 million to 4 million orders a month.

With the large addressable market in India, the two companies are also drawing the attention of global Internet majors such as China's Alibaba Group Holding and Japan's SoftBank Group, which are reportedly seeking to pick stakes in these companies.

--Dhanya Ann Thoppil

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