He believes valuations could improve over time, especially in quick commerce, but meaningful upside will depend on consolidation and clearer competitive dynamics, while broader consumption demand remains uncertain amid inflationary pressures.
These are edited excerpts from the interview.
Q: Food delivery is getting pricier, with platform fees rising. How should investors read this?
A: From an investor perspective, this is a logical approach by both players – Eternal (Zomato) and Swiggy. It reflects a shift in a two-player market where growth has stabilised at 18–20%, versus earlier high growth rates. The focus is now on recouping investments and improving monetisation, moving beyond restaurant commissions toward consumer monetisation.
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Q: How will platform fee hikes impact earnings and valuations?
A: Platform fees for both Zomato and Swiggy are broadly similar at around ₹14.9–15. The difference arises because Swiggy shows fees inclusive of GST, while Zomato reports GST separately. The recent increase is about ₹2.5.
For Zomato, EBITDA per order last quarter was ₹20–22. If fully passed through, this implies about 10% increase, but typically only about half translates. So, EBITDA may improve by ₹4–5 per order.
For Swiggy, the impact is higher as its base EBITDA per order is lower, leading to an estimated 7–9% increase.
Q: Why doesn’t the full increase translate into EBITDA?
A: Historically, when platform fees have increased, net fees recognised are lower because of rebates, discounts and additional marketing support.
Q: So, for Zomato, the EBITDA increase is 4–5%, and for Swiggy, 7–9% post revision. With EPS going up, what would the PE multiples look like?
A: The stocks have corrected materially over the last two to three months, along with the broader market. Food delivery typically trades at around 35x FY28 EBITDA. It’s not earnings multiple, as we use SOTP. That multiple has now been reduced to around 30x, which supports the earnings narrative going into the January-March quarter of 2026 (Q4FY26) earnings.
Q: Quick commerce is larger for Zomato than Swiggy, but there’s an argument that the valuation gap shouldn’t be so wide. What is the current gap, and can it be narrowed?
A: There is a significant valuation gap. Based on SOTP (sum-of-the=parts), we value Zomato’s quick commerce business at $12–14 billion, while Swiggy is at $4–5 billion. We believe the gap can narrow, but the timeline depends on competitive intensity. The market needs to consolidate from seven players to around three strong players, and currently, it is unclear who those additional players will be beyond Blinkit.
Also Read: Why Bernstein is sticking to Eternal’s ₹370 target despite leadership reshuffle
Q: Has demand been impacted?
A: There has been no material impact on demand. Demand has shifted due to menu curtailment, with larger restaurants and quick service restaurants (QSRs) gaining share as they can manage input costs better. Food delivery platforms continue to see demand fulfilled across restaurants.
Q: Any broader investment view?
A: We continue to retain our ratings on Avenue Supermarts (DMart), Titan and Trent. However, the broader consumption theme is uncertain. With potential inflationary pressures, demand recovery remains to be seen, even though valuations appear attractive.
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