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Swiggy and Zomato Seek Margin Improvement in Q2 of FY26: Insights from Analysts

by Daniel Foster - Senior Editor, Economy
written by Daniel Foster - Senior Editor, Economy




Indian Quick Commerce Firms Signal Potential Profit Turnaround

Table of Contents

New Delhi – Leading indian online delivery services, Eternal’s Blinkit and Swiggy‘s Instamart, are poised to demonstrate incremental improvements in profitability during the second quarter, according to recent analysis. This shift follows a period of ample financial losses linked to aggressive expansion and escalating operational costs within the rapidly growing quick commerce sector.

The Rise of Instant Delivery in India

Blinkit, Instamart, and Zepto have become dominant players in India’s quick commerce landscape, attracting important investment from both domestic and international investors. The industry’s competitive intensity drove companies to prioritize market share gains, ofen through substantial discounts and rapid geographic expansion. This strategy, while effective in attracting customers, exerted considerable pressure on margins.

Cost Pressures and Expansion Strategies

The pursuit of ten-minute delivery times – promising everything from essential groceries to high-value electronics – has proven costly for eternal and Swiggy. Rapid expansion, especially into smaller towns, amplified these financial strains. Though,analysts suggest this dynamic might potentially be poised for a change.

A Potential Shift in financial Performance

A gradual reduction in promotional discounting, coupled with enhanced operational efficiencies stemming from increased scale and density, is expected to contribute to better financial outcomes. Analysts at IIFL Capital Services predict a modest decline in losses for both Blinkit and Swiggy, although the advancement for Swiggy is anticipated to be more marginal.

Key Projections for Q2

Several financial institutions have released their forecasts for Blinkit’s second-quarter performance. Predictions suggest an adjusted core loss narrowing from 1.62 billion rupees in the first quarter to approximately 1 billion rupees. ICICI Securities and Motilal Oswal anticipate Blinkit’s adjusted EBITDA margin loss to fall between 0.7% and 0.6%, a significant improvement from the previous quarter’s 1.4% loss.

While Instamart’s losses are expected to remain relatively stable or see a slight increase, analysts foresee a narrowing of its adjusted EBITDA margin loss to between 12.7% and 13.8%, down from 15.8% in the preceding quarter.

Company Q1 Adjusted Core Loss (INR Billions) Projected Q2 Adjusted Core Loss (INR Billions) Q1 EBITDA Margin Loss (%) Projected Q2 EBITDA Margin Loss (%)
Blinkit 1.62 1.0 1.4 0.7-0.6
Instamart 8.96 ~8.96 15.8 12.7-13.8

Did You know? the quick commerce market in India is projected to reach $5.9 billion in 2024, growing at a compound annual growth rate (CAGR) of 68.4% from 2022 to 2028. Statista

Pro Tip: Investors closely monitor EBITDA margin loss as a key indicator of a quick commerce company’s path to profitability. A decreasing margin suggests improved operational efficiency and a stronger financial trajectory.

Eternal is scheduled to announce its earnings on Thursday, while Swiggy has yet to confirm a date for its reporting. The coming weeks will provide critical insights into the financial health of these key players in India’s burgeoning quick commerce sector.

Understanding Quick commerce Dynamics

Quick commerce, also known as instant commerce, represents a significant evolution in the retail landscape. It’s characterized by the promise of ultra-fast delivery – typically within 10-20 minutes – of a wide range of products. This model depends on strategically located micro-fulfillment centers and highly efficient logistics networks. Companies operating in this space face unique challenges, including maintaining low delivery costs, managing inventory effectively, and ensuring customer satisfaction with rapid turnaround times.

The success of quick commerce hinges on several factors: dense urban populations, increasing smartphone penetration, and a growing consumer appetite for convenience. It also requires substantial capital investment to build and maintain the necessary infrastructure and marketing efforts to acquire and retain customers.

Frequently Asked Questions About Quick Commerce in India


What are your thoughts on the future of quick commerce in India? Do you believe these companies can achieve sustained profitability? Share your opinions in the comments below!

What specific factors are contributing to the pressure on profitability for Swiggy and Zomato in Q2 of FY26?

Swiggy and Zomato Seek Margin Improvement in Q2 of FY26: Insights from Analysts

The Pressure on Profitability: A Deep Dive

Analysts are closely watching Swiggy and Zomato as both food delivery giants navigate a challenging landscape in Q2 of FY26.The primary focus? Margin improvement. While both companies have demonstrated significant growth in gross Merchandise Value (GMV), converting that growth into consistent profitability remains a key hurdle. Increased competition, rising operational costs (particularly delivery expenses), and the need for continued investment in technology are all contributing factors. This article breaks down the key strategies being employed and the analyst expectations surrounding these efforts. We’ll cover Zomato’s profitability, Swiggy’s financial performance, and the broader food delivery market in India.

Key Strategies for Margin Expansion

Both Swiggy and Zomato are deploying a multi-pronged approach to boost margins. These strategies aren’t entirely new, but the intensity and focus are increasing.

* Platform Fees & Service Charges: both companies have been incrementally increasing platform fees charged to both restaurants and customers. This is a direct revenue driver, but carries the risk of impacting order volume.

* Delivery Cost Optimization: This is a major area of focus. Strategies include:

* Route Optimization: utilizing AI and machine learning to create more efficient delivery routes.

* Delivery Partner Incentives: Refining incentive structures to attract and retain delivery partners while controlling costs.

* Dark Kitchens & Hyperlocal Delivery: expanding dark kitchen networks to reduce delivery distances and times.

* Subscription Models (Swiggy One & Zomato Gold): Encouraging customer loyalty and increasing order frequency through subscription programs. These programs offer discounts and benefits, aiming to offset the cost of acquisition and increase lifetime value.

* Advertising Revenue: Leveraging their user base and data to generate revenue through targeted advertising for restaurants and other businesses. This is a high-margin revenue stream.

* Focus on Rapid Commerce (InstaMart/Minis): While not immediately profitable, quick commerce offers higher order values and potential for cross-selling, contributing to overall revenue growth.

Analyst Expectations: Q2 FY26 Forecasts

Analysts at various firms, including Bernstein and Jefferies, predict a modest improvement in margins for both companies in Q2 FY26, but caution that significant leaps are unlikely.

* Zomato: Expectations center around a continued focus on profitability, with analysts predicting a potential for achieving break-even or slight profitability in the food delivery segment. key metrics to watch include adjusted EBITDA and contribution margin.The success of Zomato’s Hyperpure model (supply chain for restaurants) will be crucial.

* Swiggy: Swiggy, still privately held, faces greater scrutiny regarding its path to profitability. Analysts estimate that Swiggy will continue to prioritize growth, but with a sharper focus on cost control. The integration of Instamart and its impact on overall margins will be a key area of analysis.

* GMV Growth vs. Profitability: A recurring theme in analyst reports is the trade-off between GMV growth and profitability. While both companies are expected to maintain healthy GMV growth, the emphasis is shifting towards demonstrating lasting profitability.

The Impact of Competition: A crowded Market

The Indian food delivery market remains intensely competitive. While Swiggy and Zomato dominate, several smaller players and emerging platforms are vying for market share.This competitive pressure limits pricing power and necessitates continued investment in customer acquisition and retention.

* Ola Foods (Re-entry): the potential re-entry of Ola Foods into the market adds another layer of complexity.

* Regional Players: Several regional food delivery platforms are gaining traction, particularly in Tier 2 and Tier 3 cities.

* Direct-to-Consumer (DTC) Strategies: Restaurants are increasingly adopting DTC strategies, bypassing third-party platforms to reduce commission fees.

case Study: Zomato’s Subscription Model Success

Zomato gold, despite initial controversies, has proven to be a successful customer loyalty programme. By offering exclusive discounts and benefits, Zomato has been able to increase order frequency and customer lifetime value. The program’s success demonstrates the potential of subscription models to drive profitability in the food delivery sector. However, maintaining a balance between attractive benefits and sustainable margins remains a challenge.

Real-World example: Swiggy’s Dark Kitchen Expansion

Swiggy’s aggressive expansion of its dark kitchen network (Swiggy kitchens) exemplifies its strategy to optimize delivery times and reduce costs. by locating kitchens closer to customers, Swiggy can offer faster delivery and reduce reliance on long-distance delivery partners. This strategy has been particularly effective in densely populated urban areas.

Benefits of Margin Improvement for Investors & Consumers

Improved margins aren’

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Economy

India Market Outlook: Stable Macro, Earnings Key

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Stock Market Outlook: Sector Rotation and Key Company Analysis

Analyzing the current stock market outlook reveals a landscape poised for sector rotation amidst global stability. Experts emphasize the importance of the upcoming earnings season, watching for positive surprises that could trigger market momentum.This analysis provides insights into key companies and potential investment strategies.

Navigating the Current Market Structure

The market structure appears stable, especially considering macro data points in India. Attention is now shifting to tariff developments, drawing cues from international trade agreements.The focus remains on potential earnings triggers following a strong recovery in both the Nifty and broader market indices.

Pro Tip: Keep an eye on the dollar index performance, as it can influence investment flows and market stability.

Insights on Key Companies

Nykaa: A Promising Stock Yet to Deliver?

Nykaa has been a much-discussed stock, but its performance hasn’t matched the growth seen in other platform companies. Concerns linger regarding its numbers and potential exits by investors. Any momentum in nykaa appears tied to index weight increases rather than fundamental strength.

Alternatives to Nykaa: Swiggy, Eternal, and Policybazaar

When choosing among new-age companies, some experts suggest considering swiggy, Eternal, or Policybazaar as possibly stronger options than Nykaa. These companies may offer better growth prospects and stability.

IndusInd Bank: Revival and Future Prospects

IndusInd Bank has experienced a notable recovery recently, following news developments. The focus now shifts to identifying a new CEO and assessing the bank’s leadership. Its strong distribution network and deposit franchise remain solid foundations.

Having addressed major write-offs and cleared many negatives,IndusInd Bank is attracting renewed interest. Though,the broader banking sector may face underperformance in the near term.

Did You Know? IndusInd Bank’s stock saw a revival after a period of uncertainty regarding leadership and financial write-offs.

Sector Rotation: A Strategic Shift

The market may experience sector rotation, with commodities and pharmaceuticals currently performing well. Depending on earnings previews, sectors like capital goods or cement could also provide stability. This rotation suggests a market consolidation rather than a deep correction.

Pro Tip: Monitor earnings previews closely to identify sectors poised for growth and potential investment opportunities.

Potential Underperformance in Banking

banking sector fatigue could impact the overall market due to the significant weightage of banks in the index. This potential underperformance underscores the importance of diversifying investments across different sectors.

Summary of Key Investment Options

Company Sector Potential Risks
Swiggy Food delivery High Growth Competition, Regulatory Issues
Eternal Various Diversified Market Dependent
Policybazaar Insurance Aggregation Scalable Regulatory Changes
IndusInd Bank Banking Recovery Sector Underperformance
Nykaa E-commerce (Beauty) Established Brand Growth Concerns

Evergreen Insights for Investors

  • Diversification: Spreading investments across different sectors reduces risk and enhances potential returns.
  • Earnings Season: Pay close attention to quarterly earnings reports for insights into company performance and market trends.
  • Global Factors: Monitor global economic indicators and trade policies, as they can significantly impact market stability.
  • Long-Term Vision: Focus on long-term growth potential rather than short-term market fluctuations to achieve sustainable investment success.

Frequently Asked Questions

  • What is the current stock market outlook?

    The stock market outlook suggests stability with a focus on the upcoming earnings season and potential sector rotations.Experts are watching for positive surprises in growth and the impact of global factors.

  • Which sectors are expected to perform well in the stock market?

    Commodities and pharmaceuticals are showing strong performance. Other sectors like capital goods and cement may offer stability depending on earnings previews.

  • What are the expert’s views on Nykaa stock?

    Nykaa has shown promise but hasn’t made major moves like other platform companies. Its numbers aren’t strong, and there are reports of people exiting the stock.

  • How is IndusInd Bank performing in the stock market?

    IndusInd Bank has seen a sharp revival recently. The bank’s structure is considered good, and with most negatives out of the way, people are re-evaluating the stock.

  • What is sector rotation and how does it affect stock investments?

    Sector rotation involves shifting investments from one industry sector to another based on economic cycles or market conditions. It can help investors maximize returns by capitalizing on sectors poised for growth.

  • Which ‘new

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