21 November 2024
Swiggy and Zomato: The focus on food delivery companies has intensified over the past few weeks, particularly with Swiggy making its debut on the Indian stock market. With Zomato as its only competitor, investors are starting to assess both businesses to determine which one presents a better investment opportunity.
A recent report from JM Financial indicates that while India's online food delivery market is projected to grow at a robust CAGR of around 20% in the near future, the chances of new competition disrupting the market seem minimal at present. This is largely because quick commerce (QC) represents a more lucrative opportunity compared to food delivery. It is anticipated that food-tech companies will likely prioritize their QC initiatives, given that significant differentiation in food delivery is not expected. This dynamic should lead to steady growth in gross order value (GOV) (CAGR of 18-22%) and a gradual shift towards sustainable profitability (4-5% of GOV) for both established players.
“While on an absolute basis Swiggy offers decent upside, we would prefer Zomato if asked to pick only one due to its superior execution in the past and market leadership across key segments. We, however, suggest that investors play both (preferably with higher weightage for Zomato), as in any case both are likely to be amongst the fastest growing consumption names and could, therefore, outperform the broader market returns,” said JM Financial in its report.
Nevertheless, market analysts highlight several key factors to consider that also provide a clearer understanding of each business and assist in gaining perspectives that go beyond just the competitive landscape.
Swiggy and Zomato: The focus on food delivery companies has intensified over the past few weeks, particularly with Swiggy making its debut on the Indian stock market. With Zomato as its only competitor, investors are starting to assess both businesses to determine which one presents a better investment opportunity.
A recent report from JM Financial indicates that while India's online food delivery market is projected to grow at a robust CAGR of around 20% in the near future, the chances of new competition disrupting the market seem minimal at present. This is largely because quick commerce (QC) represents a more lucrative opportunity compared to food delivery. It is anticipated that food-tech companies will likely prioritize their QC initiatives, given that significant differentiation in food delivery is not expected. This dynamic should lead to steady growth in gross order value (GOV) (CAGR of 18-22%) and a gradual shift towards sustainable profitability (4-5% of GOV) for both established players.
“While on an absolute basis Swiggy offers decent upside, we would prefer Zomato if asked to pick only one due to its superior execution in the past and market leadership across key segments. We, however, suggest that investors play both (preferably with higher weightage for Zomato), as in any case both are likely to be amongst the fastest growing consumption names and could, therefore, outperform the broader market returns,” said JM Financial in its report.
Nevertheless, market analysts highlight several key factors to consider that also provide a clearer understanding of each business and assist in gaining perspectives that go beyond just the competitive landscape.
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