People Regularly Ordering Food Online To More Than Double By FY30, Says CLSA

Monthly transacting users of food delivery platforms, such as Zomato and Swiggy, are set to more than double by FY30, according to estimates by CLSA.

Users will more than double, even after making conservative estimates and restricting target users to households with a disposable income above $10,000 (about Rs 8.2 lakh), the brokerage said in an Aug. 31 note.

"We believe profitability of the online food delivery industry has well and truly been established, and its current duopoly nature is likely to help sustain take-rates," it said.

It noted the concerns around user growth, specifically the volatility in Zomato's monthly transacting users over the past four quarters. "In our view, these concerns were largely due to a reduced presence in cities, some slowdown in discretionary demand and clear prioritisation of profitability over growth."

Even if penetration across income brackets is kept the same and online food delivery players expand their service from 85% of the target market to 90%, it translates to 11% CAGR in users over the next six years, CLSA said.

Further, a major tailwind for the sector in the second half of the current fiscal would be the Cricket World Cup set to be held in India. "It should aid demand for online food delivery, as seen in other developed nations during sporting events. We remain positive on the online food delivery space," it said.

The brokerage has a 'buy' rating on Zomato Ltd., with a target price of Rs 99.6 apiece, which provides a very slight upside to its current market price.