ICICI Securities Bullish On Zomato & Swiggy, Says Investor Ignoring Food Delivery

Amid bearish investor sentiment that has dented valuations of foodtech majors Zomato and Swiggy by billions, brokerage ICICI Securities sees a potential upswing in the companies’ fortunes as soon as May 2025. 

In a report on March 4, the brokerage reiterated its ‘BUY’ rating for both companies, giving Swiggy a price target (PT) of INR 740 and Zomato a PT of INR 310. This represents a 111% upside for Swiggy and 36.3% upside for its rival. 

ICICI Securities observed that the share prices of both the companies have seen a correction of about 45% (Swiggy) and 30% (Zomato) over the past three months amid a panic among investors over the performance of their quick commerce verticals. 

“Given the increased cash burn in the quick commerce business, investors have deeply discounted quick commerce valuations citing increasing competitive intensity and high cash burns in the space,” it said. 

However, it said that these concerns have been over-baked into the stock prices for both Swiggy and Zomato. Besides, the concerns over the 10-minute delivery plays of the companies has led investors to ignore the growth of both the companies in their food delivery businesses. 

This sentiment has brought down Swiggy’s share prices to about 30% discount to its par value for food delivery business and implies negative value for quick commerce, the brokerage said. For Zomato, it said that the stock’s current price doesn’t ascribe any value to its quick commerce business. 

Income Tax Cut To Boost Food Delivery 

ICICI Securities said that food delivery has continued to scale profitably over the last 2 years.  While there was some slowdown in growth in Q3 FY25, there is no reason to be worried about structural growth drivers in the space. 

Besides, it expects the income tax cut announced in the Union Budget 2025-26 to boost consumption and benefit the food delivery sector.

“Given the discretionary and celebratory nature of food delivery, we think the sector could be the key beneficiary as consumers start seeing higher disposable incomes from May 2025,” the brokerage added. 

For context, Zomato’s profit from the food delivery segment rose 67% year-on-year (YoY) to INR 432 Cr in Q3 FY25. The segment’s adjusted revenue grew 17% to INR 2,413 Cr during the quarter from INR 2,062 Cr in Q3 FY24. 

For Swiggy, the food delivery business’ profit zoomed 6X to INR 192.72 Cr in Q3 FY25 from INR 25.66 Cr in the same quarter previous year. Meanwhile, its revenue increased 23% YoY to INR 1,636.88 Cr during the quarter. The company reported a GOV growth of 19.2% YoY to INR 7,436 Cr. 

Quick Commerce Discounting On Downward Trajectory 

In contrast to the food delivery segment, Zomato and Swiggy saw their losses from the quick commerce segment rise on the back of rising competition and their aggressive expansion strategies. Zomato clocked a near 13X YoY increase in its adjusted EBITDA loss from the quick commerce sector to INR 103 Cr in Q3 FY25, while Swiggy Instamart’s adjusted EBITDA loss margin slipped to 14.8%. 

However, ICICI Securities estimates “improvement in contribution to EBITDA conversions” for both Swiggy and Zomato from the quick commerce segment. It observed that both the players have pulled back significantly on their performance marketing spends and are now more focussed on incentivising higher order values through “some cart level discounts”.

While the companies are still employing discounts as a way to attract consumers, ICICI estimates that item level discounting is past its peak seen between November 2024 to January 2025. 

Following the report, shares of Swiggy surged 7.43% to end Tuesday’s session at INR 350.65 on the BSE. Zomato jumped 2.45% to end the session at INR 227.50. 

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