Bank of America (BofA) expects steady growth for India’s internet sector in the first quarter of fiscal 2027. Despite potential fuel price volatility due to geopolitical tensions, brokerages project healthy performance for major players like Zomato, Meesho, and PB Fintech.
What Happened
Bank of America (BofA) has released its outlook for India's internet and new-age technology sector for the first quarter of fiscal year 2027 (April-June 2026). The brokerage expects a stable quarter across the industry, forecasting healthy growth and improved margins. While geopolitical tensions in the Middle East have raised concerns about rising fuel prices, which typically affect logistics and delivery-heavy companies, BofA remains optimistic about the overall sector's resilience and growth potential.
Segment Performance Outlook
The report highlights varying growth trajectories across sub-sectors. In the e-commerce space, the brokerage anticipates strong performance from Meesho, projecting an estimated 33% growth in net merchandise value. The report suggests that Meesho’s advertising revenue is likely to see continued improvement.
In the food delivery and quick commerce segment, Zomato (referred to as Eternal in the brokerage report) is projected to achieve 17% quarter-on-quarter growth in net order value. This is expected to be driven by aggressive store expansions and seasonal factors, though the firm continues to navigate intense competition in the quick commerce space. Swiggy is also expected to show moderate growth of 4%, with the company focusing on its goal of achieving margin breakeven.
Fintech And Travel Trends
In the fintech space, BofA anticipates steady momentum for Paytm, projecting 5% to 8% growth in its payments and financial services divisions. PB Fintech, the parent company of Policybazaar and Paisabazaar, is expected to post robust business figures with an estimated 35% year-on-year growth in premiums and disbursals. However, investors may note that the company's EBITDA margin is expected to decline by 360 basis points quarter-on-quarter, a trend the brokerage attributes to seasonal factors.
For the travel sector, MakeMyTrip is forecast to report 14% constant currency growth despite softer conditions in domestic and westbound air travel segments. Its various business lines, including air, hotel, and bus services, are expected to see solid year-on-year growth, partially supported by currency depreciation impacts.
Risks And Margin Pressure
The report identifies potential headwinds, primarily concerning fuel prices. Logistics-focused firms like Delhivery could face temporary margin pressure if rising fuel costs cannot be immediately passed on to customers. Historically, such cost increases are passed through with a lag, which can temporarily affect operating margins. Investors generally watch these fuel-linked sectors closely during geopolitical instability, as any sustained spike in crude oil prices can raise operational costs for delivery fleets.
What Investors Should Track
As the earnings season approaches, the key monitorables include:
- Margin Trajectory: Whether companies like Delhivery can effectively manage fuel cost volatility without significantly impacting profitability.
- Competitive Dynamics: How quick commerce players like Zomato manage margin goals while maintaining high growth in a competitive environment.
- Seasonal Impact: Whether the margin contraction anticipated for firms like PB Fintech aligns with historical seasonal patterns or indicates broader cost pressures.
- Management Commentary: Specific updates on advertising revenue, take rates, and operational efficiency improvements will be crucial for assessing the long-term sustainability of the growth projected by analysts.