After three to four months of negotiations, merger talks between online food delivery firm Swiggy and smaller rival Uber Eats India have hit a roadblock on valuation expectations as well as tax and legal issues, people in the know told The Times of India (ToI) and The Economic Times (ET).
“The deal is stuck for now and may only proceed after Uber Eats India parent Uber’s public offering in the next one-two months,” said one person.
As part of the proposed transaction, Uber would have taken shares in Swiggy, which was last valued at $3.3 billion when it raised $1 billion from South African entity Naspers and others. Japan's SoftBank Group, an investor in Uber, had proposed that the global ride-hailing firm pump in primary capital at a reduced valuation, persons told ET.
Tax experts told ET that a transfer of assets from the Netherlands-based Uber BV to India-headquartered Swiggy could pump up the cost of the deal. Therefore, the ownership of UberEats India will have to change for the deal to materialise, a person told ET.
Another person told ET the talks have been called off because Swiggy and Uber Eats India could not agree on the breakup fee in case the merger didn't go through.
Separately, two people in the know told ET that Chinese device maker Xiaomi and its venture capital arm Shunwei Capital are likely to pick up a 10% stake worth Rs 50 crore ($7.2 million at current exchange rate) in Chalo, valuing the bus-tracking app at Rs 500 crore ($72.3 million at current exchange rate).
Navi Mumbai-based Chalo, owned by Zophop Technologies Pvt. Ltd, is a free platform that predicts the arrival time of buses and offers trip-planning services. It currently has a presence in 15 cities with a Tier-II focus.
The investment will be Xiaomi’s 11th bet in India’s startup ecosystem. The company has been aggressive in its investment strategy to provide an app ecosystem on its devices. It has invested in KrazyBee, ZestMoney, and ShareChat, among others.