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Zomato vs Swiggy: Macquarie compares food delivery, fast commerce | Market news

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Zomato vs Swiggy: Macquarie compares food delivery, fast commerce | Market news

4 minutes of reading Last update: October 16, 2024 | 10:50 A.M IST

Zomato vs Swiggy IPO, Macquarie Report: Ahead of food aggregator Swiggy’s likely initial public offering (IPO) in November 2024, brokerages have been benchmarking Swiggy against its close rival and listed player Zomato to judge which is the best bet for investors .

Global brokerage Macquarie is the latest to join the league. To facilitate the comparison between Zomato and Swiggy, analysts at Macquarie have split and analyzed the ‘food delivery’ and ‘quick commerce’ verticals of the two companies.

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Swiggy, Macquarie said, appears to be 4-6 quarters behind Zomato in food delivery and fast commerce.

“For Swiggy, the path to catch-up in food delivery is relatively simpler, while that in fast-paced commerce is more complex,” he noted in his latest report titled “Head-to-Head: Zomato versus Swiggy”.

For the uninitiated, Swiggy is looking to raise up to Rs 3,750 crore through fresh issue of shares, along with an offer for sale (OFS) of up to 185,286,265 equity shares (185.28 million shares) of the company

Swiggy IPO date, Swiggy IPO lot size and price bands are yet to be announced.

Zomato vs Swiggy: Fast Trade

According to Macquarie, Zomato’s fast commerce app ‘Blinkit’ is way ahead of Swiggy’s ‘Instamart’ in terms of monthly transaction users (MTU), average order value (AOV), efficiency (based on a higher performance of the dark store) and Take-Rate. (higher ads, direct brand sourcing).

Macquarie’s analysis shows that both Blinkit and Instamart had similar MTUs at the end of financial year 2022-23 (FY23), roughly in the 3 million range.

Blinkit, however, has fared ahead of Swiggy Instamart with 7.6 million MTUs at the end of Q1FY25 compared to the latter’s 5.2 MTUs.

In terms of order numbers, Blinkit is expected to close FY25 with 400 million orders, growing at a compound annual growth rate (CAGR) of 40% between FY24 and FY28.

Meanwhile, Swiggy Instamart is seen closing FY25 with just over 200 million orders.

Also, Blinkit’s AOV is about 25 percent above peers due to higher contribution from Delhi NCR with higher share of non-grocery (key reason for current better unit economics than their peers), Macquarie noted. The brokerage pegs Blinkit’s FY25 gross order value at around $3 billion versus Instamart’s just over $1 billion.

“Blinkit has Rs 25 per order or a contribution margin (CM) of 4 percent in the fast commerce segment compared to Instamart’s negative margin (-15 percent in Q1FY25). , the customer fees and lower cost,” Macquarie noted in its report.

All the same, if Instamart’s AOV improves to Rs 600, then its contribution margin would break even; moreover, for adjusted Ebitda to break even, GOV needs to catch up along with a higher acquisition rate and client fees, the brokerage said.

Zomato vs Swiggy: Food Delivery

According to Macquarie analysis, Zomato’s food delivery segment had 20.3 million MTUs at the end of Q1FY25, compared to Swiggy’s 14 million MTUs. This 31 percent difference has been consistent since FY23.

Total FD orders for Zomato stood at 218 million at the end of the first quarter of the current financial year against 156 million for Swiggy. The AOV for Zomato, however, was Rs 425 per order against Swiggy’s Rs 436 per order.

Keeping this in mind, Zomato’s GOV stood at $1.116 billion at the end of Q1FY25 against Swiggy’s $820 million; Zomato Food Delivery’s revenue was $234 million compared to Swiggy’s $183 million; and Adjusted Ebitda margin (as a percentage of GOV) was 3 percent for Zomato versus 1 percent for Swiggy.

Macquarie said Swiggy could reach an adjusted Ebitda margin of 4-5% by reducing delivery costs.

“Amidst similar AOVs, Zomato’s FY25 GOV is estimated to be $4.8 billion, with a likely growth CAGR of 16% over FY24-28. Macquarie said.

First post: October 16, 2024 | 10:49 AM IST

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