iconiifl-logo-icon 1
IIFL

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

  • Open Demat with exclusive Advice & Services
  • Get a dedicated Relationship Manager to help you grow your wealth
  • Exclusive advisory on 20+ trading & wealth-based investment options
  • One tap Investments, Automated trading & much more
  • Minimum 1 lakh margin required
sidebar image

Internet: Focus on profitability over market-share gains

1 Dec 2023 , 10:17 AM

In its H1FY24 earnings release, Swiggy’s largest investor Prosus, has published incremental data points on Swiggy’s growth and profitability for H1CY23. In the Food Delivery segment, Swiggy has gained a marginal market share vs Zomato in H1CY23; potentially a function of aggressive pricing of their loyalty plan and higher promotions. Analysts of IIFL Securities believe H2 would potentially see Zomato regaining some of that share, given the success of their Gold program. On quick commerce, Blinkit has potentially surpassed Instamart’s GMV. Swiggy’s overall GMV and revenues grew 23%/9% YoY, on higher share of Quick Commerce; while delivery partners have plateaued. Swiggy’s adj. Ebit loss for H1 stood at USD208mn (-41.7%) vs that of Zomato at -7.9%. However, it has been improving vs a loss of -70.1% YoY. While Zomato seems to have greater focus on profitability, analysts of IIFL Securities believe Swiggy would follow the same strategy in the near term given their IPO ambitions. This should stabilise market share volatility and help both companies improve unit economics. Maintain BUY on Zomato. 

Swiggy’s Food Delivery gains market share: 

In H1CY23, Swiggy’s Food Delivery GMV grew at 17% YoY in local currency vs Zomato at 13% YoY. Consequently, Zomato’s market share (MS) in the largely two-player India Food Delivery market reduced by 70bps HoH. However, Zomato continues to enjoy market leadership with 54% MS. According to Prosus, Swiggy’s GMV growth was led by rise in transacting users that drove double-digit order growth and higher AOV. Analysts of IIFL Securities expect Zomato to benefit from the loyalty program in H2, regaining some of the lost market share. 

Blinkit surpasses Instamart GMV: 

In Quick Commerce, Blinkit’s GMV grew 83% YoY in USD terms in H1, surpassing Swiggy Instamart’s GMV that grew at 63% YoY. The Quick Commerce business made rapid strides as customer adoption drove the order growth. Basket sizes grew well ahead of inflation. Instamart’s store count ended 19% higher. With the platform focused on gaining scale and moving towards profitability in the 25 cities where it operates, Instamart’s H1 contribution losses fell by around 75%. Broader product selection, densification of store network and faster delivery times have continued to aid customer acquisition and retention. 

Zomato closing in faster on Ebit breakeven: 

While both Swiggy and Zomato reduced losses (both sequentially and YoY); Swiggy’s adj. Ebit loss for H1 stood at USD208mn (-41.7%) vs that of Zomato at - 7.9%. While Zomato seems to have higher focus on profitability, analysts of IIFL Securities believe they would see Swiggy follow the same strategy in the near term given their IPO ambitions. According to Prosus, Swiggy’s core food-delivery Ebitda losses in H1 shrunk 89%; led by improvements in the contribution margin and operating leverage. In combination, this reflects customer willingness to pay for convenience and restaurant willingness to advertise for growth. The addition of a platform fee in both the platforms further highlights the improving unit economics. 

Swiggy is spread wider, while Zomato deeper: 

Swiggy continues to have a larger database of active restaurants at 274k, as of H1 vs Zomato’s 226k. However, Zomato is closing in on the gap of number of delivery riders at 352k, as of H1 vs Swiggy’s 369k. This is compared to Swiggy having 44k higher delivery riders than Zomato, as of CY22. Swiggy continues to expand presence across cities and currently operates in 599 cities. On the other hand, Zomato has trimmed the number of cities that it operates in to ~700 from the peak of 1,000. 

Continued industry tailwinds amid profitability focus; Maintain BUY on Zomato: 

Analysts of IIFL Securities believe that India’s Food Delivery industry will continue to benefit from the structural tailwinds of changing customer preferences, while Quick Commerce continues to benefit from newer use cases. With the favourable industry dynamics, particularly in Food Delivery and both the players in a duopoly focusing on profitability, the industry is likely to continue witnessing the improving unit economics. Analysts of IIFL Securities maintain BUY on Zomato.

Related Tags

  • Internet
  • Swiggy
  • Zomato
sidebar mobile

BLOGS AND PERSONAL FINANCE

Read More

Most Read News

4 Mar 2024   |   09:10 AM
4 Mar 2024   |   06:22 PM
4 Mar 2024   |   08:40 AM
4 Mar 2024   |   06:37 PM
Read More
Knowledge Centerplus
Logo

Logo IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000

Logo IIFL Securities Support WhatsApp Number
+91 9892691696

Download The App Now

appapp
Knowledge Centerplus

Follow us on

facebooktwitterrssyoutubeinstagramlinkedin

2024, IIFL Securities Ltd. All Rights Reserved

ATTENTION INVESTORS
  • Prevent Unauthorized Transactions in your demat / trading account Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors.
  • KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
  • No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."

www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.

RISK DISCLOSURE ON DERIVATIVES
  • 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
  • On an average, loss makers registered net trading loss close to Rs. 50,000.
  • Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
  • Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.
Copyright © IIFL Securities Ltd. All rights Reserved.

Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248

plus
We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.