Food Delivery The 'Real Cash Generator' — Nomura Starts Swiggy Coverage, Eternal's Target Price Hiked
Nomura has rated Swiggy a 'buy' and has a target of Rs 550, which implies a 25% upside from Friday's close.
Nomura initiated coverage on Swiggy Ltd. and hiked its target price for Zomato's parent Eternal Ltd. The brokerage sees the food delivery business as the real cash generator for the companies because of duopoly.
Nomura has rated Swiggy a 'buy' and has a target of Rs 550, which implies a 25% upside from Friday's close. The brokerage has a 'buy' rating on Eternal as well and raised the target price to Rs 370 apiece from Rs 300. The current target price implies a 9.1% upside from Friday's closing price.
The food delivery industry is moving towards 15–20% steady growth rate and improving Ebitda margins due to scale benefits. Improving unit economics, and rising penetration and usage are also contributing to the growth. This business is a cash generator for both Eternal and Swiggy, according to Nomura.
The gross order value growth of Eternal's food delivery business is likely to be at 16% for financial year 2026 and 21% in financial year 2027 with contribution margin of 8.6% in the current financial year and 9% next financial year, Nomura said.
Meanwhile, Swiggy's constant product innovations are helping it gain market share against Zomato. Nomura is expecting Swiggy's market share will likely increase by 100 basis points in financial year 2026. In the long term, as the scale builds, contribution margin and adjusted Ebitda of the two players will converge.
Nomura is estimating 20% CAGR in GOV for Swiggy's food delivery business in financial year 2025 and 2027. In the near term, the company will provide 87% year-on-year growth in gross order value, with gradual reduction in contribution margin.
Nomura is expecting that Swiggy's Instamart contribution margin will likely turn positive in the second quarter of financial year 2027.
Blinkit, Zomato's quick commerce business, has announced that it is transitioning to inventory-led model over the next two-to-three quarters. This transition would aid 100-basis-point margin expansion and an increase in working capital days to 18 days from five days, according to the brokerage.
Nomura expects 80% of GOV to transition to inventory-led model and raised the long-term contribution margin estimate by 60 basis points to 6.9%. Blinkit will likely break-even at adjusted Ebitda level in fourth quarter of financial year 2026.
