Zomato, Swiggy Get 'Add' As Incred Begins Coverage On India's E-Commerce Food Tech

Incred initiated coverage on India's e-commerce food technology industry with a positive view. It has an 'add' rating on Swiggy Ltd. and Zomato Ltd.

There's large opportunity and food delivery profitability to support expansion in quick commerce, it said. It also sees long runway for monthly target users.

The brokerage has target price of Rs 270 per share for Zomato, and Rs 540 for Swiggy Ltd.

Both Swiggy and Zomato are well placed to take advantage of incremental growth in food delivery business, Incred said. The companies have early-mover advantage, control over unit economics, and adequate funding. This suggests both Zomato and Swiggy are better placed to capture a share of incremental growth in the food delivery business. As for quick commerce, the potential market opportunity is large enough to accommodate rising competitive intensity.

Incred sees India's food delivery and quick commerce businesses to grow 17–22% and 60–80% CAGR over next four years. The quick commerce industry can accommodate the rising competitive intensity, as companies in the sector are evolving for convenience and experience. This, coupled with speed of delivery, creates hyperlocal and high-frequency demand, Incred said in a note.

Platforms are capturing a growing share of online sales for select FMCG brands. It's not just an early market of success, but represents a shift in consumer behaviour, according to the brokerage. FMCG brands are increasing supply-chain spending, targeted towards quick commerce platforms, to leverage the trend, Incred said in a note.

Companies in India's e-commerce food technology are enhancing capabilities by diversifying into high margin non-grocery categories. They are also employing a unified application approach to boost customer engagement and profitability, in order to strategically capitalise on India's rapid urbanisation and rising demand for convenience, Incred said.

Food delivery business can be a cash cow, given rising consumer adoption of online ordering and control over unit economics, the brokerage said.

These platforms provide an attractive opportunity for advertisers, given its growing monthly transaction users. Advertising tools enhancement could help run unique and customised campaigns, backed by data and analytics. An increasing number of advertisers may lead to better monetisation, which in turn support take rate.

Zomato uses a dedicated fleet of delivery partners for both its food delivery and quick commerce businesses, unlike other players in this space. The company focuses on operational efficiency within each segment, which, along with an expansive restaurant network, ensures efficient order fulfillment and timely delivery, according to Incred.

This complementary system allows Zomato to control service quality, which ensures customer satisfaction and better customer experience subsequently, solidifying its leadership in the highly competitive Indian food delivery landscape, the brokerage said.

Blinkit achieving adjusted Ebitda breakeven over the next two-to-four quarters would unlock substantial investment ability, which will likely offset rising competitive intensity and capture a share of the incremental profit pool.

Incred expects Zomato's food delivery and quick commerce verticals' revenue CAGR to grow at 23% and 72% between financial year 2024 and 2027, to drive bulk of the growth in overall business.

Changing consumer preferences, high competition, operational challenges in new space, and market volatility remains a key risk.

Swiggy's aggressive rollout of Bolt— a 10-minute food delivery option—to over 400 cities may unlock new usage scenarios which are unmet by existing service models. Early mover advantage with continuous innovation complements existing food delivery services, offer a distinct value proposition and likely expands the addressable market and overall reach within the food delivery market, Incred said.

The brokerage expects Swiggy's food delivery and quick commerce revenue verticals to grow at 20% and 83% CAGR respectively, for financial years 2024 to 2027.

Strategically located dark stores across 54 Indian cities enable quick and efficient fulfilment with an average delivery time of 12.6 minutes. This will likely help Swiggy to capture incremental market share. The company is also aiming to add 400 new dark stores to capture further market share.

Swiggy's food delivery business turned profitable in the second quarter in financial year 2025. Improved operational efficiency, expanding high-margin offerings and revenue streams, such as Swiggy One membership program, will further aid profitability, Incred said.