Recently, shares of Swiggy and Zomato experienced gains of up to 3% amidst adjustments to membership perks ahead of the monsoon season. Both companies have decided to roll back benefits for premium users, specifically waiving the rain surcharge. This fee, which can range from ₹15 to ₹35, will now be borne by all users, including those enrolled in Swiggy One and Zomato Gold.
The decision to cut premium member benefits, specifically the waiver on rain surcharges, is linked to a broader push by Swiggy and Zomato to enhance profitability. As their quick commerce divisions continue to face challenges, the companies are focused on ensuring that their food delivery businesses remain profitable. During adverse weather conditions, these surcharges help support delivery partners.
In Q4, Zomato's food delivery business, under Eternal (its parent company), reported an adjusted EBITDA of ₹428 crores, marking a 55% year-on-year increase. Swiggy's food delivery operations saw even more impressive growth, with adjusted EBITDA standing at ₹212 crores, a fivefold increase year-on-year.
However, some analysts suggest that 2025 might be a year of consolidation for Zomato's stock, following a period where its share price more than doubled in value during 2024. Concerns have been raised about increasing competition in the quick commerce sector, with firms like Zepto, Blinkit, and Instamart vying for market share. Aggressive strategies from existing and new competitors could lead to increased discounting, which may pose risks to Zomato's medium-term profitability. Jefferies has reduced Blinkit's EBITDA forecast for FY26-27 and also decreased Zomato's overall EBITDA estimates by 12% for FY26 and 15% for FY25.
BofA downgraded Zomato's shares from "Buy" to "Neutral," reducing the target price to ₹250 per share from ₹300. Similarly, Swiggy's rating was lowered to "Underperform" from "Buy," with the price target reduced to ₹325 per share from ₹420. These downgrades reflect concerns about rising losses in the quick commerce space.
Zomato's shares experienced a 5% decline, reaching ₹264.85 apiece on the NSE, while Swiggy's shares were trading at ₹522.70, down 1.77%.
