The food delivery and quick grocery business in India has seen tremendous growth in recent years, driven by changing consumer habits, urbanization, and a growing preference for convenience. Companies like Swiggy and Zomato dominate the food delivery landscape, offering a vast range of cuisines from local restaurants and chains, with fast delivery times and user-friendly apps. These platforms also expanded their services to include grocery deliveries through partnerships with supermarkets and local kiranas.
Swiggy Instamart and Zomato’s BlinkIt cater to consumers seeking quick grocery solutions, capitalizing on the increasing demand for online shopping. As internet penetration deepens and consumer trust grows, the industry is poised for further growth, with innovations like dark kitchens and AI-powered logistics expected to improve service efficiency and reach tier-2 and tier-3 cities.
Market Landscape
Swiggy and Zomato are the two main competitors in India’s food delivery market, each striving to capture a larger share. Swiggy dominates with its aggressive expansion into groceries through Instamart, while Zomato focuses heavily on restaurant delivery and its premium services like Zomato Gold. Besides this Zomato also has a strong foothold in the quickcommerce grocery business through BlinkIt which has helped it significantly to turn profitable.
Additionally, both platforms charge a platform fee to restaurants, but Swiggy is often seen offering slightly lower discounts compared to Zomato in the online food business to expand its customer base. Discounts play a crucial role in customer acquisition, with both platforms frequently offering deals, Swiggy has also been more aggressive with discounting, especially in the grocery segment.
However, BlinkIt, now owned by Zomato, leads in quick-commerce (instant grocery delivery) with a 50%+ market share, while Swiggy Instamart follows closely with around 30%. Swiggy’s strong logistics network and broader product offerings give it an edge, while Zomato’s premium subscriptions and dining services attract loyal customers.
Share Price
Zomato: The shares of Zomato are trading at Rs. 298.35 down by 0.45% from its previous close of Rs. 299.35 as of December 06, 2024.
Swiggy: The shares of Swiggy are trading at Rs. 543 up by 0.54% from its previous close of Rs. 540 as of December 06, 2024.
Comparison
Zomato has shown impressive financial performance, posting a profit of ₹351 crore for FY 23-24. Its shares are currently trading at ₹299.35 with a high PE ratio of 390, reflecting strong investor confidence in the company’s future growth prospects.
On the other hand, Swiggy, despite being a significant player in the food delivery industry, has posted a loss of ₹2,350 crore for the same period. Its shares are trading at ₹540, with a market capitalization of ₹120,787 crore. In comparison,
Zomato’s market cap stands at ₹289,028 crore, showcasing its profitable position in the market. Given this contrast in financial health and market valuation, is it better to invest in a profit-making company like Zomato over a loss-making one like Swiggy?
Financial Highlights
Sales Growth
Zomato and Swiggy both posted impressive sales growth from September 2023 to September 2024. Zomato saw its sales increase from ₹2,848 crore to ₹4,799 crore, marking a 68% YoY growth. Swiggy also experienced a rise in sales, from ₹2,763 crore to ₹3,601 crore, reflecting a 30% increase. Zomato’s higher growth rate demonstrates stronger momentum in its business operations.
EBITDA Performance
Zomato showed a significant improvement in EBITDA, moving from a loss of ₹47 crore in September 2023 to a profit of ₹226 crore in September 2024. This turnaround highlights Zomato’s operational efficiency and its ability to manage costs better. On the other hand,
Swiggy’s EBITDA remained negative at ₹-554 crore, although it improved slightly from the previous year’s loss of ₹-624 crore.
OPM % (Operating Profit Margin)
Zomato’s operating profit margin (OPM) increased dramatically, shifting from -2% in September 2023 to 5% in September 2024. This positive shift reflects the company’s improved efficiency and profitability. Swiggy, however, continued to struggle with a negative OPM, improving from -23% in September 2023 to -15% in September 2024, signaling ongoing challenges in achieving profitability at the operational level.
Profit
Zomato also made strides in net profit, growing from ₹36 crore in September 2023 to ₹176 crore in September 2024. This indicates strong profitability and a well-managed business strategy. Meanwhile, Swiggy reduced its net losses from ₹-657 crore to ₹-626 crore, showing a slight improvement, but it still faces significant challenges in reaching positive profitability.
Gross Order Value
Zomato’s GOV for its food delivery business in Q2 FY25 stood at ₹9,690 crore (+5% QoQ), whereas Swiggy’s GOV was ₹7,191 crore (+5% QoQ). Zomato’s GOV in the food delivery business is approximately 35% higher than Swiggy’s, demonstrating its stronger foothold in the core food delivery market.
Zomato outperformed Swiggy with a much higher GOV. One major factor for this can be attributed to Zomato’s acquisition of Paytm’s entertainment ticketing business, which boosted its GOV numbers.
If we exclude this and compare it on a like-for-like GOV growth basis, Zomato achieved a 53% YoY growth, while Swiggy reported a 29.9% YoY growth. This highlights Zomato’s larger overall scale of business.
Average order value (AOV)
Swiggy: ₹499 (7.7% YoY increase from ₹463 in Q2 FY24)
Zomato: ₹660 (8.7% YoY increase from ₹607 in Q2 FY24)
Zomato’s AOV grew faster and remained higher than Swiggy’s AOV, indicating stronger consumer spending per order.
Targets by Brokerage Houses
Macquarie
Analysts remain optimistic about Swiggy’s future growth potential, with Macquarie forecasting a target price of Rs 700 in the long term. The brokerage believes Swiggy is well-positioned to close the gap with Zomato in food delivery, given its aggressive expansion strategies and strong market presence.
However, in the short term, Macquarie has an ‘underperform’ rating on Swiggy, citing the intense competition and high operational costs, with a target price of Rs 325.
For Zomato, Macquarie has revised its target to Rs 130, reflecting a more cautious outlook amidst fierce competition. The brokerage’s reassessment of Blinkit’s unit economics and Zomato’s core food delivery business led to a downward revision of earnings estimates, though it raised the target price based on a more favorable discount rate assumption.
Axis Direct
Zomato has been given a target price of ₹350, supported by strong growth across its business segments. The company’s B2C business has seen robust gross order value (GOV) growth of 14% QoQ and 55% YoY, reaching ₹17,670 crore in Q2FY25.
GOV has consistently grown at a CAGR of 30% from FY20 to FY24. Blinkit continues to show strong performance, with a 20% QoQ growth in Q2FY25, and new stores achieving break-even contribution.
With a healthy medium-to-long-term outlook and management’s confidence in FY25 outperforming FY24, Zomato’s growth trajectory looks promising, justifying the target price.
Conclusion
The comparative analysis reveals Zomato’s strategic advantage in the Indian food delivery market. With impressive financial metrics, including a profitable status, higher average order value, and substantial gross order value growth, Zomato appears better positioned for future expansion.
While Swiggy remains a significant player, its ongoing operational losses and lower financial performance suggest that investors might find Zomato a more attractive investment opportunity in the rapidly evolving quick-commerce and food delivery landscape.
However, Swiggy’s constant improvement in operational efficiency is helping the company to narrow its losses dramatically, this in the long run could give stiff competition to Zomato Ltd. Going forward it will be interesting to watch who wins this race. Although in the short run, Zomato looks to be better placed the burning question still lies in can Swiggy topple Zomato and be the new market leader in the segment.
Written By: Dipangshu Kundu
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