Swiggy vs Zomato: Which food delivery stock should you buy for long-term? Here’s a 5-point analysis

Swiggy vs Zomato: After a lagged public offer, food delivery giant Swiggy delivered a powerful stock market debut, beating analysts’ estimates. D-Street experts say the new-age tech stock is poised for a strong run on the bourses, similar to its rival Zomato, which is now a multibagger stock.

After an intense competitive period (FY15-18) during which multiple food delivery offerings (Zomato, Swiggy, Faasos, Foodpanda, Uber Eats) contended to stay afloat; the Indian online food delivery market has effectively settled into a comfortable duopoly as most were either bought out or shut shop. 

In food delivery, players have settled into a cozy duopoly. The scale difference (Zomato is 30 per cent bigger than Swiggy) can be explained largely due to the MTU and city presence. Swiggy has lost its lead over FY22-24 in terms of market share as well as efficiency. However, it seems ~4-6 quarters away on most KPIs.

Despite the smaller scale, domestic brokerage HDFC Securities still expects Swiggy to lag Zomato by 150-200bps on GOV growth (FY24-27), as within key inputs, both are likely to be evenly matched on MTUs and AoVs, but there isn’t much room on ordering frequency for Swiggy. Swiggy hit EBITDAM breakeven in Q1FY25, however, it needs to catch up on platform funded-discounts and fixed cost absorption.

Swiggy is a new-age, consumer-first technology company offering users an easy to-use convenient, unified app platform to browse, select, order, and pay for food (Food Delivery), groceries, and household items (via Instamart), with orders delivered to doorsteps through their on-demand delivery partner network. It also offers restaurant reservations (via Dineout) and event bookings (via SteppinOut). Other offerings include product pick-up/drop-off services (via Genie) and other hyperlocal activities (via Swiggy minis, among others). Being among the first hyperlocal commerce platforms, Swiggy has successfully pioneered the industry in India, launching Food Delivery in 2014 and Quick Commerce in 2020.

Zomato is an e-commerce company and a leading online food delivery and restaurant discovery platform in India. Some of the key services provided by the company are: 

• Zomato’s platform facilitates convenient online food ordering, user-generated reviews and ratings, and provides extensive restaurant menus, enabling customers to make informed decisions and enhance their overall dining experience. 

• Hyperpure business offers a direct and reliable supply chain solution, connecting farmers with restaurants by providing high-quality, fresh raw materials necessary for their operations. 

• Zomato has introduced the Zomato Gold membership program, offering exclusive benefits such as discounts and complimentary dishes at partnered restaurants, adding value and enhanced experiences for its subscribers. 

• In 2024, Zomato acquired Grofers and rebranded it as Blink-It. Blink-It operates as a quick-commerce service provider, offering rapid delivery of groceries, fresh produce meat, bakery items, personal care products, baby care items, pet care products, snacks and more within 10 minutes.

Zomato has established itself as the leading player in India’s food delivery industry, capturing a market share of 56 per cent-57 per cent in online food orders in FY24 while, Swiggy, a key competitor, holds a market share of 40 per cent. Other restaurant chains collectively possess a relatively smaller market share of five per cent.

According to domestic brokerage Axis Securities, the food tech platform business, like any emerging segment, has seen its share of evolution and consolidation. The industry started with different players focusing on specific verticals, be it restaurant advertising/listing, food delivery, grocery delivery, etc.

 Over time, it saw exits and consolidation, emergence of new categories, to the current state where there are two dominant players – Zomato and Swiggy – which now compete across restaurant listing/advertising, food delivery, and quick commerce. The players now form a duopoly through a strong moat of expansive network effect on their platforms, with 64 Mn and 53 Mn annual transacting users, respectively, as well as 2,00,000 restaurants and 3,20,000 delivery partners on each of the platforms.

 Zomato has been competing with Swiggy since its formation and sustained and gained the market share because of its better execution capabilities. Both platforms also have quick-commerce businesses, with Swiggy building it in-house, while Zomato acquiring Grofers and pivoting it. Zomato’s execution appears to be better than Swiggy’s, as reflected in its market share gains and becoming the largest player across both segments despite Swiggy’s early-mover advantages.

–1. Food delivery business 

Swiggy four to six quarters behind Zomato on KPIs in food delivery. Zomato edged Swiggy out on efficiency over FY22-24; but Swiggy may be 4-6 quarters away on most KPIs: Post an aggressive expansion (in presence) of its food delivery operations in FY22 (from 455 to 1,000+ cities), FY22-24 marked a phase of driving efficiency for Zomato wherein (1) operations were withdrawn from low user-density cities), (2) restaurant, delivery partner, order densities, and ATU-toMTU conversions were improved upon, and (3) consequently, monthly ordering frequency (MoF) and AoV improved.

In food delivery, HDFC Securities suspects, over FY24-27, Swiggy will likely follow the Zomato playbook and focus on efficiency. If Q1FY25 performance is anything to go by, Swiggy has already managed to improve fixed cost absorption meaningfully (fixed costs down to 5.6% of GoV vs Zomato’s 3.9% in Q1FY25 vs 6% of GoV in Q1FY24). However, it seems Swiggy has stepped off the growth pedal to achieve this, whereas Zomato managed to achieve efficiency whilst growing at a fast clip. Note: Swiggy FD GoV grew a mere 14% YoY vs Zomato’s 27% YoY in Q1FY25.

On GoV growth over FY24-27, despite the smaller scale, we still expect Swiggy to lag Zomato by 150-200bps, as within key inputs, both are likely to be evenly matched on MTUs and AoVs. However, we don’t see room to improve on ordering frequency for Swiggy (unlike Zomato, which has room to catch up).

–2. Quick commerce business 

While Swiggy was among the first to venture into quick commerce with its erstwhile 30-45 min delivery model, it has lost considerable market share to the other two (Blinkit & Zepto) from FY22 until now. 

While Swiggy and Zepto have been building their QC vertical organically, Zomato benefitted from the Grofers (Blinkit now) acquisition in FY23 as (1) Blinkit in its earlier avatar was a stock-up online grocer (High AoVs) and (2) the extreme concentration (~43% of GoV in Q4FY24; 40% now) of Blinkit in Delhi-NCR region ensured a higher GoV/day per store to begin with.

 HDFC Securities values Swiggy on an SOTP basis and assign (1) 38x FY27 EV/EBITDA to the mature food delivery business, (2) 1.2x FY27 EV/GOV to the fast-growing quick commerce segment, (3) 0.5x FY27 GOV for the OOH consumption segment and (4) 1x FY27 sales each for the supply chain & distribution and the platform innovations verticals. This translates to 4x FY27 sales for the consolidated operations

Axis Securities initiated coverage on Zomato with a BUY rating. “We expect Zomato to strengthen its presence in the food-delivery market and gain market share through its continuous adoption of new technology and bringing new innovations in the food-delivery business. This will continue to drive more number of users to the platform. Against this backdrop, we initiate coverage on the stock with a BUY rating and value the company on SOTP valuation to arrive at a target price of ₹280/share” said the brokerage.