Amid fears that escalating competition from Zepto, DMart, Flipkart Minutes and a potential Amazon entry into the high-growth quick commerce (QC) market could lead to higher cash burn, shares of Zomato and Swiggy have fallen sharply, dropping up to 23 percent from their recent peaks.
Both Swiggy and Zomato have been rapidly expanding their dark store operations leading to increased costs, including higher rentals, product discounts, and free delivery services through loyalty programs. These rising costs may adversely affect contribution margins and EBITDA, further heightening market concerns over their QC operations’ profitability, according to analysts.
A reverse SOTP valuation on the current price by JP Morgan suggests that the market is pricing in flat Ebitda margins for Zomato’s QC business into FY26 and lower margins for FY27.
“It is also pricing in just INR 70 per share for QC or
He said Swiggy’s share price is pricing in the QC business missing its Dec-25 overall break-even target, persistent losses until FY27 and missing the QC EBTIDA breakeven target by 2QFY27.
“This appears pessimistic to us given Swiggy’s profitability in the FD business and improved execution in QC,” he said, adding that current share prices are attractive entry points for both stocks and would buy at these prices.
Despite the delayed profit delivery from quick commerce given the accelerated pan-India ramp-up and the increased competitive intensity, domestic brokerage firm ICICI Securities also said both Swiggy and Zomato are likely to outperform the broader indices in 2025.
“We think that the fast ramp-up of the dark store footprint is helping the incumbents create a barrier to entry into the segment. Our analysis indicates that if they manage to execute their plans properly, top 3 incumbents would control >75% (by FY26) of the potential dark stores that are feasible in India,” ICICI’s Abhisek Banerjee said.
JM Financial analysts say Zomato has the capability to generate free cash flows without compromising topline growth, owing to strong execution skills.
“Zomato is a clear market leader (in GOV/revenue terms) across all its operating business segments. It is also well ahead of the competition on the profitability front across business segments. Moreover, it is the only major hyperlocal delivery company in the country that, at a consolidated level, is currently generating free cash flows, without having compromised on topline growth. This indicates the strong execution capabilities of the management, giving us the confidence that Zomato is the best placed company to fend off emerging competitive threats in quick commerce,” JM Financial said.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times and