Indians overall were highly disappointed with the outcome of the ICC Men’s Cricket World Cup 2023. The event though brought cheer in certain sectors such as the online food delivery industry with companies like Zomato Ltd and Swiggy seeing a significant boost.
“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).
Zomato estimates a 25-30% year-on-year GOV growth for the December quarter. The competition between Zomato and Swiggy, however, remains tight. Swiggy’s market share in the first half of calendar 2023 stood around 46%, showing a modest increase from 2022, according to calculations made based on the data released by Prosus and Zomato’s disclosed metrics. Prosus holds about 33% stake in Swiggy.
This rise is noteworthy, especially considering the launch of Zomato’s loyalty program, Zomato Gold, in late January.
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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.
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 report by JM Financial Institutional Securities dated 30 November. 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, the broking firm noted.
In the quick-commerce segment, Zomato’s Blinkit outperformed with GOV growth in H1, despite a 6% drop in store count. Swiggy’s Instamart, meanwhile, saw slower growth despite a 19% jump in store count.
All the aforementioned points suggest that Zomato is leading in execution now. Investors have given a thumbs up, as the stock has almost doubled in 2023 so far. The company’s continued focus on profitability, particularly in Blinkit, could further bolster investor confidence.