Hero in an all-stock deal.

Ola said in a statement it was committing an investment of Rs 1,300 crore ($200 million) into the food delivery business.

The collaboration between Ola and Foodpanda India unlocks the power of a partnership that will help Foodpanda India grow as the most preferred online food delivery service in the country, Ola said in a statement Tuesday.

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. Pranay Jivrajka, a founding partner at Ola, will be the interim CEO of the business unit. The company had recently announced a tie-up with Zomato to enable food via from its in-car Ola Play platform. Delivery Hero will continue to collaborate with Ola to build Foodpanda's service in India.

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. Also, Saurabh Kochhar, who was the CEO of Foodpanda India until recently, has made a decision to depart to pursue other opportunities.

According to industry sources, Ola had been working on getting back into the food delivery business to compete with UberEATS and that the acquisition of FoodPanda India is a step in that direction. The company had started a venture called Ola Cafe back in 2015, though it shut down the business previous year. Not being able to raise fresh funds, past year Foodpanda's parent Rocket Internet had started the process to sell the company amid a fund crunch. For many, it makes ideal 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 Östberg, chief executive officer and co-founder at Delivery Hero. Today, commission rates to restaurant partners have stabilised at 18-20 per cent; customers are willing to pay extra for delivery during monsoons and peak time because they get access to varieties of food with on-time delivery.

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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