Whalesbook
Market Dynamics Shift
This quarter's different performance between Zomato and Swiggy shows how India's food delivery and quick commerce markets are changing. The main food delivery business still provides steady income for both companies. However, quick commerce expansion is now marked by growing competition and a strong need for profit, shifting investor focus away from growth at any cost towards lasting financial health.
Growth Drivers Differ
Both Zomato and Swiggy still depend on their established food delivery services, expected to see gross order value grow 18-20% year-over-year. Zomato also benefits from higher platform fees, about ₹14.9 per order (before GST), which helps its profit margins and supports its quick commerce arm, Blinkit. But the quick commerce sector itself faces major challenges. Tough competition, especially from players like Zepto, which uses lower minimum order values and bigger discounts, is slowing down growth. Zepto, valued at $3.6 billion, holds about 20% of India's quick-commerce market. Blinkit leads this segment with roughly 44-46% market share, followed by Swiggy Instamart at 23-25%. The quick commerce market is forecast to expand significantly, from $3.65 billion in 2026 to $6.64 billion by 2031.
Valuations Adjust Amid Competition
Market corrections have made valuations more appealing for both companies. Zomato's stock has dropped about 32% from its highest point, which analysts at Motilal Oswal see as a good chance for investors looking at the medium term. The company’s market value was around $21.55 billion as of March 2026. Swiggy, which is not publicly traded, has a valuation of $10.7 billion, with some reports suggesting a $12 billion valuation for its IPO. However, valuations across the sector have fallen 35-40% from their peaks due to intense competition and slower growth. Analysts are hopeful but careful; Motilal Oswal keeps a 'Buy' rating on Zomato with a ₹330 target, and CLSA has set a ₹506 target, highlighting Blinkit's significant role.
Risks in Rapid Growth
The fast expansion of quick commerce carries risks. Zepto's aggressive pricing, while gaining market share, puts constant pressure on the profits of Zomato and Swiggy. Although Blinkit leads in quick commerce, its revenue growth has come with bigger losses due to heavy investments in its operations. Swiggy Instamart, despite using Zomato's customer base, also needs large investments for its dark store expansion, adding to overall losses. The market now favors profitability and efficient operations over unrestricted growth, a big change from earlier growth-focused periods. Furthermore, fierce competition could lead to price wars that hurt profits, making it hard to generate earnings consistently. Zomato's P/E ratio, fluctuating around 994x as of March 2026, shows a high valuation that requires steady growth and profit delivery.
Focus Shifts to Profitability
Looking ahead, both Zomato and Swiggy aim to improve their per-order profitability and achieve sustainable earnings. Zomato's purchase of Blinkit has been key to its path to profit, with Blinkit’s revenue growing significantly year-over-year. Zomato has shown steady profits, while Swiggy is currently focused on growing its market and acquiring customers, showing different main priorities. India's quick commerce market is expected to keep growing fast, requiring all companies to constantly innovate and adapt to keep their market share and succeed financially in the long run.