Zomato leads even as Swiggy closes in
While fans were disheartened with the outcome of the ICC Men’s Cricket World Cup 2023, a certain section has benefitted. The sporting event is likely to have boosted food ordering, benefiting companies such as Zomato Ltd and Swiggy. “The online food delivery segment is likely to have seen a 5-8% year-on-year incremental growth in quarterly gross order value (GOV) during the World Cup,” said Karan Taurani, analyst at Elara Securities (India).
But which company has gained more needs to be seen. Zomato estimates its GOV growth in the December quarter to be 25-30% year-on-year. For now, Zomato and Swiggy are neck and neck in market share. Swiggy’s market share in the first half of 2023 (H1 2023) was 46%, according to calculations made based on the data released by Prosus, and Zomato’s disclosed metrics. Prosus holds about 33% stake in Swiggy.
Swiggy’s market share has risen from the levels seen in 2022, albeit slightly. Notably, this rise was despite the roll out of Zomato’s loyalty programme—Zomato Gold in late January. This is a potential indication that Swiggy chose growth over profitability as it continued to be in the red at the Ebitda level. This is even after Swiggy said its food delivery business turned profitable in March. On the other hand, Zomato’s food delivery business clocked adjusted Ebitda of ₹259 crore in H1.
“Recent results suggest Swiggy’s gains in the food delivery vertical were partly attributable to Zomato’s diversion in focus towards profitability,” said a JM Financial Institutional Securities report on 30 November. The brokerage says these trends may not be sustainable in the long run, as at some point in time Swiggy, too, aspires to become a listed entity, in which case it would have to demonstrate notable improvement in profitability.
In the quick-commerce business, Zomato’s Blinkit put on a better show with GOV growth in H1 even after a 6% drop in store count. But Swiggy’s Instamart saw a relatively slower pace of growth despite a 19% rise in the store count.
All these points suggest that Zomato is leading in execution now. Investors have given a thumbs up. The stock has almost doubled in 2023. Continued progress towards profitability in Blinkit may keep investor sentiment intact.