Boosting Profits with Higher Fees
Food delivery companies Zomato and Swiggy are increasing platform fees. Analysts see this as a logical step as the market shifts from rapid growth to a stable duopoly, with growth rates now around 18-20%. This strategy moves beyond relying only on restaurant commissions to directly charging consumers. The small increase of ₹2.5 per order, bringing total fees to about ₹15, is expected to lift EBITDA per order by roughly 10% for Zomato and 7-9% for Swiggy. For Zomato, this could mean an improvement of ₹4-5 per order, although historically only about half of such fee increases are fully kept due to discounts. This financial adjustment follows a significant drop in Zomato's stock, down about 32% from its October 2025 peak, trading near ₹229. The company has a high debt-to-equity ratio of 6.75.
Quick Commerce: High Valuations and Fierce Rivalry
A significant difference in valuation exists between Zomato's quick commerce unit, Blinkit, valued at $12-14 billion, and Swiggy's Instamart, valued at $4-5 billion. Blinkit, acquired by Zomato for $568 million in August 2022, holds over 50% of the quick commerce market share as of September 2025. However, Blinkit's prices are reported to be 6-8% higher than rivals, which could risk losing market share in this fast-growing sector. This segment is projected to expand from $3.65 billion in 2026 to $6.64 billion by 2031. While quick commerce is growing fast, it's still only about 4% of India's total food FMCG market, expected to reach 15-20% by 2030. Growth here depends on market consolidation, which remains unclear beyond Blinkit being a top player. Swiggy, valued at about $10.7 billion, also faces challenges as it tries to shift from a high-spending growth model to better operational control.
Consumer Demand Holds Steady Despite Fee Hikes
Consumer demand for food delivery has not been significantly affected by the platform fee increases, with growth rates holding steady between 15-20%. This stability is supported by overall economic trends. India's consumption demand is improving, with Private Final Consumption Expenditure showing strong growth in late 2025. Lower inflation and supportive government policies are expected to continue this trend, though some analysts remain cautious about overall consumption due to potential price increases. The expanding middle class is driving strong household demand, a key factor in India's economic growth. In contrast, established retailers like Avenue Supermarts (DMart) trade at a P/E of approximately 89, significantly below their 10-year median, while Titan and Trent trade at P/E ratios of about 70-75, also below their historical averages. This suggests that while food delivery companies are focusing on profits, traditional retail might offer more stable valuation measures.
Risks: Margin Pressure and Market Share Battles
The main risk for food delivery platforms is intense competition that could hurt their profitability per order. HSBC has warned that Blinkit's higher prices might lead to a loss of market share, affecting its leading per-order economics. While Zomato's stock is rated 'Buy' by many brokerages, price targets have been lowered due to concerns about the quick commerce competitive environment. Swiggy, despite some 'Buy' ratings, faces a more significant turnaround challenge, with HSBC recommending 'Hold' due to pricing worries. Additionally, Zomato's significant debt burden of ₹1.68 trillion enterprise value and elevated leverage ratios present a structural vulnerability. Analysts are lowering their valuation multiples for the food delivery business from 40x to 35x FY27e EV/EBITDA, indicating a broader downward re-evaluation in the sector. Changing competitive factors, including Amazon's entry into quick commerce, create an unstable operating environment that could pressure profits and growth.