More upside for Zomato stock, but competition is also rising

In Q-commerce, Flipkart, Amazon, Reliance and Big Basket are entering the space.

They all have deep pockets, so the competitive intensity will increase in the future.

E-com platforms are likely to offer discounts and wider assortments during the festive season.

Given more dark stores, wider assortment and improved penetration, the festive season growth could see a big boost.

Non-grocery sales like smartphones and furniture happen in the first few weeks of the holiday season.

The second wave of shopping happens on Dussehra, where the Q trade will be big.

The third wave is around Diwali. Q-commerce GMV (gross merchandise value) could be the equivalent of $1 billion with online sales totaling $12 billion.

Surveys indicate that consumers are willing to spend much more than last year.

Zomato leads food delivery and Q-commerce, but there is an intense war for market share. Swiggy’s integrated app offering versus Zomato’s multi-app approach may be more market-friendly and Swiggy is also innovating with Bolt, a 10-minute food delivery platform.

Swiggy’s food delivery business has seen 42% year-on-year expansion in user base and 73% growth in restaurant partners, while Zomato has seen 38% and 53% growth respectively , in the user base and restaurant partners. on higher bases.

Zomato gained market share from Swiggy from financial year 2022 (FY22) to Q1FY25. The reported gross order value (GOV) indicates that Zomato’s market share grew from 54% in FY22 to 58% in Q1FY25.

The average monthly transaction users (MTU) is higher for Zomato (20.3 million) vs. Swiggy (14.03 million), but the GOV per MTU is 6% higher for Swiggy, which indicates that Swiggy customers are more mature and stickier.

Swiggy’s take rates are slightly ahead of Zomato’s, indicating better monetization of the platform (possibly in ad sales from restaurant partners).

However, take rates may converge.

Zomato’s food delivery business shows steady GOV growth and predictable profitability with an EBITDA margin of 3.4 percent. Swiggy’s food delivery business has broken even, with a lower ebitda margin of 0.8%.

Blinkit (formerly Grofers), which acquired Zomato, surpasses Instamart in Q-commerce.

Zepto and Blinkit are gaining market share against Instamart.

As of Q1FY25, Instamart operated a network of 557 active dark stores across 32 cities, while Blinkit has 639 active dark stores across 44 cities.

Blinkit has 81 percent higher GOV (Rs 4,923 crore) than Instamart in Q1FY25.

Blinkit had a higher take rate of 19.1% in Q1 2025 compared to Instamart’s 14.8%, and Blinkit also led take rates at 18.5% in FY24 (18.5%) versus Instamart (13.5%).

Instamart’s average order value is also lower than Blinkit, which also comfortably leads in profitability.

Blinkit’s adjusted ebitda margin was less than 0.1 percent in 1Q25 versus Instamart’s 11.7 percent.

Swiggy’s new 10-minute food delivery offers brands like KFC, McDonalds, Burger King, Starbucks, etc.

Zomato tried a similar fast food delivery pilot in 2023 but failed to scale.

Given the recent expansion of the Q trade, the 10-minute food delivery space could soon be more crowded.

Zomato could sustain FY24-27 revenue CAGR of 55 percent, and PAT margins could grow from 4.3 percent (expected FY25) to 8.7 percent in FY26 and above double digits in FY27.

Assuming a cost of capital of 12.5%, the DCF (Discounted Cash Flow) calculation with these assumptions implies 20% upside for Zomato.

However, assuming Swiggy’s IPO is successful, capital could be deployed to present a tougher challenge to the leader.

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