Despite Falling Share Prices, Brokerage Firms Give Swiggy and Zomato a 'Buy' Rating. Tax cuts could boost the food delivery business, benefiting investors in the long term.
Swiggy-Zomato: Swiggy and Zomato share prices have fallen sharply over the past three months. Swiggy's share price has dropped by approximately 45%, while Zomato's has fallen by 30%. This decline is largely attributed to rising expenses in the quick commerce (QC) business. Increased market competition and aggressive discounting strategies employed by companies like Zepto have put pressure on Swiggy and Zomato. However, according to brokerage firm ICICI Securities, the market has overreacted to these concerns, and the current valuation is now attractive for investment.
Investor Neglect of the Food Delivery Business
Experts believe investors are currently overlooking Swiggy and Zomato's core food delivery business. Despite steady growth and improved profitability in this sector over the past two years, the slight slowdown in food delivery growth in the third quarter of 2025 does not indicate a major crisis in the industry.
Historically, government tax cuts have led to increased consumer spending. Tax reductions in 2006, 2011, 2013, and 2014 resulted in increased market demand. Similarly, the 2026 budget included tax rate cuts, potentially increasing disposable income for the middle class. This could directly impact food delivery companies and improve their revenue.
Are Quick Commerce Concerns Justified?
Increased competition and excessive discounting in the quick commerce sector have fueled investor concerns. Companies are offering continuous discounts to attract customers, impacting their profitability. Investors fear this strategy is not sustainable in the long term.
However, according to ICICI Securities, the situation is not as dire as it appears. In recent months, quick commerce platforms have adjusted their discounting policies. Instead of offering significant discounts on small orders, companies are now focusing on incentivizing larger orders. This could improve the average order value (AOV) and reduce company losses.
Furthermore, companies are beginning to reduce their marketing expenses, leading to expectations of improved profit margins. While significant profitability in this sector will take time, it could present opportunities for long-term investors.
Will the Discounting Strategy in E-commerce Continue?
Swiggy, Zomato, and other e-commerce companies are offering substantial discounts to attract customers. However, the question remains: will this discounting policy continue?
According to brokerage firms, this strategy is not sustainable in the long run. Market trends show investors are now focusing on sustainable and profitable business models. If companies rely solely on discounts to stay competitive, their valuations will be affected, and they may face difficulties in future fundraising.
Current Status of Swiggy and Zomato Shares
According to ICICI Securities, Swiggy and Zomato shares are attractive investment options at current prices. The brokerage firm has given both companies a "buy" rating.
Swiggy Target Price: INR 740
Zomato Target Price: INR 310
Swiggy shares closed at 350.65 on the BSE, potentially offering a 110% return in the long term. Zomato shares closed at 226.90 on the BSE, with a potential return of up to 37%.
Over the past six months, Swiggy shares have decreased by 23%, and Zomato shares have decreased by 6.5%.
Valuation of Swiggy and Zomato's Food and Quick Commerce Businesses
Swiggy's Food Delivery Business: INR 998 billion (USD 11.7 billion)
Swiggy's Quick Commerce Business: INR 428 billion (USD 5 billion)
Zomato's Food Delivery Business: INR 1.6 trillion (USD 19.6 billion)
Zomato's Quick Commerce Business: INR 966 billion (USD 11.4 billion)
Should Investors Invest in Swiggy and Zomato?
According to ICICI Securities, Swiggy and Zomato could be good long-term investment options at current prices. Government tax cuts will increase the spending power of middle-class consumers, benefiting these companies.
However, some risks remain. If consumer spending slows or the government introduces new regulatory hurdles, growth could be affected. But according to brokerage firms, the recent market downturn makes these shares attractive investment opportunities.
