Twinning Tunes: How Swiggy & Zomato Leave Upside Room for Investors?

Ever since the IPO of Swiggy was announced, the food delivery platform attracted eyeballs from analysts to investors leading its comparison to its direct peer and arch rival Zomato. The latter one, listed at the bourses since November 2021, has survived the bumpy rides of Dalal Street and is set to become part of Sensex by next month.

Brokerage firms and analysts continue to remain positive on both the stocks, considering their respective positives. In a nut shell, they believe that Zomato will continue to perform well in terms of financial masculinity and expansion, while the recently listed Swiggy has a potential to achieve a lot in terms of market share and positive bottomline.

Swiggy's gross order value (GOV) of $3.3 billion is 25 per cent below leader Zomato. Swiggy's monthly transacting users (14 million) lag Zomato ( 20million), while order frequency is in-line and average order value is slightly higher. Swiggy's contribution margin is 100 basis points behind Zomato due to higher discounts.

The Quick Commerce Game

To put things in perspective of the quick commerce space, Zomato's Blinkit is a fast growing platform with improved margin, while Instamart has a higher average order value (AOV) with higher cost but lower dark stores. However, Instamart is a loss making business while Blinkit has a positive bottomline.

Earlier this week, overseas brokerage firm UBS initiated coverage on Swiggy, finding it to trade at a discounted rate to Zomato. It believes that the food-tech player is well positioned to benefit from the rapid growth in India's food delivery and quick commerce markets with an estimated Gross Merchandise Value (GMV) and revenue CAGR of 35% and 29% over FY24-27E.

It also mentioned that Swiggy is catching up with Zomato on margins and scale in the duopolistic online food delivery market. However, quick commerce (QC) leaves room for a lot of work to be done with encouraging signs. Quick commerce business has three players dominating the market with Zepto being the third force.

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