Food delivery set for 20–22% GOV growth; Eternal & Swiggy top bets

India’s food delivery and quick commerce (QC) sectors are entering another phase of heightened competition after a brief period of rationalization, as leading players ramp up promotional campaigns and spending to capture market share. However, unlike the intense cash burn witnessed in late FY25, the current cycle is expected to be more measured, supported by operating leverage and improving unit economics.

Over the past two quarters, profitability in both food delivery (FD) and QC segments improved amid slower dark-store expansion and disciplined discounting. That trend, however, appears to be reversing. With fresh capital infusions and renewed marketing pushes—including nationwide “no-fee” campaigns and brand refresh initiatives—industry competition is expected to intensify once again.

Despite these developments, analysts note that this phase differs from the earlier land-grab cycle. Dark-store additions are likely to be much lower, with new launches estimated to moderate by nearly 90 percent compared to last year’s aggressive buildout. Most newly opened stores are already past their breakeven phase of four to six months, paving the way for incremental throughput and margin improvement. For major platforms, throughput—measured as daily orders per store—is projected to rise by roughly 30 percent over the next four quarters, offering a key cushion against rising promotional expenses.

The FD market continues to consolidate as a stable duopoly, with gross order value (GOV) growth expected to remain robust at 20–22 percent annually over FY26–27. High user stickiness and consistent take rates underpin a healthy medium-term outlook for the segment, supported by operating leverage and steady consumer demand.

In contrast, QC remains a more volatile but fast-growing category. The industry setup resembles the previous cycle, but with lower burn intensity and faster normalization in contribution margins. Efficiency improvements—from better dark-store utilization to higher average order values—are expected to accelerate profitability recovery.

Overall, while renewed discounting could temporarily pressure margins, the sector’s structural fundamentals appear intact. With a more disciplined expansion strategy, rising throughput, and strong consumer adoption, the food delivery and quick commerce markets are positioned for sustainable, medium-term growth even amid competitive resurgence.

Eternal – Target Price: Rs 410

Eternal is witnessing strong momentum as it shifts to an inventory-led model, driving a sharp 90 percent quarter-on-quarter and 183 percent year-on-year surge in net revenue through full-value recognition of goods sold. Its quick commerce arm delivered exceptional performance in 2QFY26, with monthly order value up 137 percent year-on-year, aided by scale-up and store expansion. Contribution margins improved from 3.9 to 4.6 percent, supported by the inventory model that now contributes around 80 percent of order value, lifting gross margins. Franchise and e-commerce revenues are also gaining traction, underscoring a scalable business mix. Despite higher marketing spends, consolidated EBITDA margins improved, reflecting early operating leverage. Eternal’s diversified model and Blinkit’s growth potential position it well for sustained value creation.

Swiggy – Target Price: Rs 550

Swiggy’s medium-term outlook remains positive, driven by improving efficiency and operating leverage across food delivery and quick commerce. In 2QFY26, the company halved its cash burn quarter-on-quarter through tighter cost control, targeted marketing, and optimized incentives. Management expects quick commerce breakeven by 1QFY27, supported by higher dark-store throughput and rising average order values. Non-grocery categories now form 26 percent of gross order value, aiding margin stability and diversification. Food delivery profitability continues to improve, reinforcing structural gains in unit economics. The planned ₹100 billion fundraise enhances financial flexibility to sustain growth amid renewed competition. With better visibility on profitability, disciplined capital use, and a resilient operating model, Swiggy is well placed for long-term value creation.

(The author is Head – Research, Wealth Management, Motilal Oswal Financial Services Ltd)

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