Zomato’s share price increased by over 2% in early trading on Tuesday, driven by a positive outlook from brokerages following improved performance by its rival Swiggy in 2023, indicating robust growth in the food delivery and quick commerce sectors.
Prosus, Swiggy’s largest shareholder, reported ongoing strength in Swiggy’s food delivery and quick commerce segments, with Swiggy’s gross order value (GOV) rising by 26% year-over-year (YoY) in 2023, paralleling Zomato’s 26% growth (in USD) over the same period.
However, Zomato outperformed Swiggy in overall revenue growth, with a 55.9% YoY increase in adjusted revenue compared to Swiggy’s 24% YoY growth. Swiggy’s trading losses narrowed to $158 million in FY24, whereas Zomato achieved a positive EBITDA of $5 million during the same period, according to CLSA.
Emkay Global Financial Services noted that Zomato’s superior growth has been supported by the strong performance of its Quick Commerce segment. Swiggy turned EBITDA positive in March 2023, with improved profitability in food delivery due to operational leverage and additional revenue streams, reducing overall losses to $261 million in 2023 from $531 million in 2022.
“Swiggy’s performance highlights the sustained momentum in Food Delivery and the rise of Quick Commerce,” said Dipeshkumar Mehta, Senior Research Analyst at Emkay Global Financial Services. Prosus emphasized that Swiggy’s quick commerce GOV has significantly outpaced the e-commerce industry, driven by geographical expansion and SKU growth. Similarly, Zomato’s Blinkit has shown marked improvements across various metrics in recent quarters, reflecting favorable industry trends.
Continuous improvements in operational performance and Swiggy’s planned IPO are expected to sustain high investor interest in the sector. The upcoming IPO is a significant milestone, with its valuation being a key focus, Mehta added.
Zomato’s share price has surged over 10% in the past month and has risen more than 63% year-to-date (YTD), delivering multibagger returns of over 172% in one year.
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