Quick Commerce: Can Zomato and Swiggy overcome the challenges of profitability amidst strong competition?

ET Intelligence Group: Food Delivery Service Providers stocks, Eternal (Zomato) and Swiggy, show weakness after quarterly results following pressure on profitability. However, the focus on sustained growth in total total order value (GOV) and the expansion of Quick Commerce (QC) services is considered a positive factor. Analysts maintain their eternal “buying” for the growth of Blinkit. In the case of Swiggy, food delivery remained strong despite Instamart flashing. Each company reported a continuous decline in revenues and government in the food supply segment. Slow demand, a temporary shortage of delivery partners, and competition with QC service providers in the packaged food segment were key factors driving demand. Zomato has listed 19,000 non-compliant restaurant partners, further impacting performance. This trend is expected to improve in the coming quarters.

In the QC segment, companies reported more than double the government and revenue growth, while Zomato’s QC service outperforms Swiggy’s Instamart. “Instamart continues to blink of an eye on growth and progressive unit economics,” says Anand Rathi’s research.

Swiggy’s bolt service contributes 12% to food delivery orders. It has expanded its services to 500 cities and partnered with over 45,000 restaurants.

“Zomato’s decision to end its 10-minute food delivery gives Swiggy a clear area for innovating and gaining market share in the quick food delivery market,” Motilal Oswal Financial Services said in a report. The broker expects to adjust its operating income before revenues increase by 63% and depreciation and amortization (EBITDA) decreases by 14% in the June quarter. In the case of Swiggy, Motilal Oswal lowered its profitability estimates due to increased competition and faster Darkstore expansion. The broker expects net losses to increase above FY26 and FY27 compared to revenue. This is reflected in current expectations of -18.9% and -10% net profit for FY26 and FY27 compared to previous estimates and previous estimates of -11.4% and -5.4%.

For Zomato, the study of Elara Capital and Anand Rathi maintains “buying” at a target price of £300. For Swiggy, Anand Rathi maintains “buy” with a target price of £400.