comScore

How Zomato has an edge over Swiggy

Zomato's shares have appreciated nearly 26% over the past year, suggesting a resilient market confidence in the company's future prospects.
Zomato's shares have appreciated nearly 26% over the past year, suggesting a resilient market confidence in the company's future prospects.

Summary

  • Nevertheless, for investor sentiment towards Zomato to improve, a resurgence in food delivery business growth is critical

The rivalry between India's two major online food delivery platforms, Zomato Ltd and Swiggy, has been intensifying, with Zomato having gained the upper hand on several key metrics. According to data released by Prosus, an investor in Swiggy holding a 33% stake, Zomato held steady at a 55% market share in H2CY22, while displaying superior profitability.

“Our back-of-the-envelope calculations suggest Swiggy’s adjusted Ebit loss in H2CY22 was down about 30% sequentially to 1,800 crore (monthly burn of about $38 million) from 2,500 crore in H1," said analysts at JM Financial Institutional Securities in a report on 27 June. Analysts have attributed this improvement to Swiggy's initiatives to reactivate users, enhance monthly frequency, and boost user conversion.

However, despite this progress, Swiggy's overall loss is more than twice of that reported by Zomato. This discrepancy could be attributed to Swiggy's investment in its quick-commerce vertical, Instamart. To provide a more direct comparison, JM Financial included Blinkit consolidation from 1 July. It's worth mentioning that Swiggy managed to achieve break-even in its food delivery business by March 2023.

When it comes to geographical reach, Swiggy boasts more restaurants registered on its platform across 580 cities, compared to Zomato's presence in 750 cities. But Zomato exited approximately 225 cities in January.

All said, an industry-wide slowdown remains a concern. The growth in gross merchandise value (GMV) for food delivery has moderated for both Swiggy and Zomato over the past three quarters. For example, Swiggy's sequential GMV growth dropped to 5% in H2CY22, down from 10% in H1CY22.

In the fast-expanding quick-commerce segment, Swiggy's Instamart recorded a stellar 459% GMV growth in 2022, albeit on a small base. Similarly, Zomato's Blinkit has also seen robust growth, with a narrowing of losses. "Growth numbers clearly point to an increased buy-in from customers, and we remain excited on the quick commerce opportunity," said analysts at Jefferies India in a report on 27 June.

However, for investor sentiment towards Zomato to improve, a resurgence in food delivery business growth is critical. Despite challenges, Zomato's shares have appreciated nearly 26% over the past year, suggesting a resilient market confidence in the company's future prospects.

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