Ola acquires Foodpanda India to enter food delivery business, invests $200 million

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Ola, which is flush with funds after raising $1.1 billion in October from Chinese internet behemoth Tencent Holdings, has committed an investment of $200 million into Foodpanda.

The transport major has also announced its partnership with Germany based Delivery Hero Group ("Delivery Hero"), the leading global online food ordering and delivery marketplace.

Under the deal, Foodpanda's India business will be transferred to Ola in exchange of the latter's stock, Ola said in a statement.

Saurabh Kochhar, the current CEO of Foodpanda India, has made a decision to move on, the release said. Importantly, this announcement adds a new dimension to India's brutal food delivery war and Ola's ongoing cab rivalry with Uber.

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According to Jefferies, Zomato is now processing 2.5 million orders per month in India, while Swiggy, the market leader, is clocking 3 million to 4 million orders a month. However, Ola Cafe was not able to attract many customers, so it was shut down.

The competition has been intense in the segment with the likes of Sequoia Capital-backed Zomato and Swiggy, backed by Naspers, competing aggressively to capture the market.

The move signifies Ola's interest in the lucrative online food ordering market in India that is expected to grow at a compound annual growth rate of about 60 per cent over the next five years and hit a gross merchandise value (GMV) of $2.5-3.5 billion by 2021.

"Foodpanda has come to be a very efficient and profit-focused business over the last couple of years", Bhavish Aggarwal, co-founder and CEO of Ola said.

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Earlier previous year, Ola shut down its Ola Café after it faced tough competition from food delivery majors - Swiggy, Tinyowl and Zomato.

Foodpanda has over 15,000 restaurants across 100 Indian cities on its platform. For many, it makes flawless sense for Ola to acquire Foodpanda which has the market expertise and established user base than trying its hand and getting burned again with a similar attempt as Ola Cafe. "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 Ostberg, CEO and Co-founder of Delivery Hero AG. But given that this time it is pegging its fortunes to a business with scale, Ola just might emerge second time lucky.

One of the two jewels in German internet firm Rocket Internet SE's India crown, Foodpanda's fire sale has been a face-saving one for the incubator to exit the country after its washout show with Jabong's sale in July 2016.

The efforts bore fruit as last month, Foodpanda's India unit said its revenue for the year through March 2017 jumped 64% on year to Rs 62.16 crore while losses narrowed to Rs 44.81 crore from Rs 142.64 crore.

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