- LPG shortage in India may impact food delivery platforms, says Kotak Institutional Equities
- Commercial LPG supply to restaurants is expected to be diverted to domestic households
- Restaurants may raise menu prices and prioritise dine-in over delivery services
The shortage of LPG availability is likely to have an impact on food delivery platforms such as Zomato and Swiggy, according to a Kotak Institutional Equities report.
Amid the Middle East tensions and closure of the Strait of Hormuz, India is reportedly witnessing a shortfall of LPG, with most commercial supply expected to be diverted to domestic households. This is likely to drive a shortage of commercial LPG supply to restaurants, impacting food delivery orders and the possibility of higher menu prices.
How are Zomato, Swiggy likely to be affected?
In light of LPG concerns, restaurants are planning to replace high gas-consuming menu items with other items, prioritise the dining-in business instead of deliveries, and hike menu prices. These measures are expected to result in a temporary impact on food delivery operations led by Zomato and Swiggy, according to the report.
Who will be impacted more - Swiggy or Zomato?
In case of a complete month-long disruption in food delivery operations, with no cut in the fixed costs of companies, it is expected to impact Swiggy's FY2026 FD EBITDA by 21% and Eternal's FD EBITDA by 16%, according to the report. However, it is difficult to estimate the exact impact on earnings due to uncertainty in the LPG shortage. Notably, the impact will be temporary. In terms of stock, Swiggy is impacted more, as it operates on a higher fixed-cost structure and thus, the impact on its EBITDA is higher, and at the current market price, 100% of its value is due to the food delivery business, and a longer disruption is expected to impact it more, it added.
Will there be a change in delivery costs?
According to Kotak, the scale-up of Russian crude oil imports and surplus refining capacity provides a cushion for petrol and diesel availability. Additionally, any near-term petrol and diesel price hikes are unlikely. Hence, no significant change in delivery costs is expected currently.
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