Best E-commerce Stocks – Zomato vs Swiggy

Company Overview of Zomato

Zomato Limited is an online portal that connects users, restaurant partners, and delivery partners. The company offers a platform for restaurant partners to promote themselves to their target audience in India and abroad and also supplies ingredients to these partners. 

The company operates in India for food ordering and delivery, Hyperpure supplies (B2B business), Quick commerce business, and other residual segments. The food ordering and delivery segment facilitates online food orders and deliveries by linking users, restaurants, and delivery personnel.  

Company Overview of Swiggy

Swiggy, founded in 2014 by Sriharsha Majety, Nandan Reddy, and Rahul Jaimini, is a leading Indian online food ordering and delivery platform headquartered in Bangalore. Operating in over 580 cities as of July 2023, Swiggy has diversified its services to include Swiggy Instamart for quick commerce and Swiggy Genie for same-day package deliveries. 

The company has attracted significant investments from firms like Prosus and SoftBank, achieving a valuation of approximately $10.7 billion in 2022. Swiggy continues to expand its footprint in India’s competitive food delivery and hyperlocal services market.

The stock performance of Zomato

The table below displays the month-by-month stock performance of Zomato Ltd Ltd for the past year.

The stock performance of Swiggy

The table below displays the month-by-month stock performance of Swiggy Ltd Ltd.

Fundamental Analysis of Zomato

Zomato Ltd is a prominent Indian multinational food delivery and restaurant aggregator company, founded in 2008. It provides a platform for users to discover and order food from various restaurants, offering features like menus, reviews, and ratings. 

The stock, priced at ₹282.50 with a market cap of ₹2,66,478.69 crore, has delivered an impressive 1-year return of 140.63% and a 6-month return of 61.01%. Currently trading 5.58% below its 52-week high, its 5-year average net profit margin of -31.56% reflects historical losses despite recent market momentum.

• Close Price ( ₹ ): 282.50
• Market Cap ( Cr ): 266478.69 
• Book Value (₹): 20406.00
• 1Y Return %: 140.63
• 6M Return %: 61.01
• 1M Return %: 15.86 
• % Away From 52W High: 5.58
• 5Y Avg Net Profit Margin %: -31.56 

Fundamental Analysis of Swiggy

Swiggy is a leading food delivery platform in India, established in 2014. It offers a vast selection of cuisines and partners with numerous restaurants, enabling customers to order food conveniently from their favourite local eateries. With its user-friendly app and website, Swiggy provides a seamless experience, catering to the diverse tastes of its users across various cities.   

The stock, priced at ₹493.70 with a market cap of ₹1,12,336.48 crore, has shown consistent performance with a 1-year and 6-month return of 8.27%, and a strong 1-month return of 17.55%. Trading just 4.72% below its 52-week high, it reflects steady market positioning.

• Close Price ( ₹ ): 493.70
• Market Cap ( Cr ): 112336.48 
• Book Value (₹): 7791.46
• 1Y Return %: 8.27
• 6M Return %: 8.27
• 1M Return %: 17.55 
• % Away From 52W High: 4.72  

Financial Comparison of Zomato and Swiggy

The table below shows a financial comparison of Zomato Ltd and Swiggy Ltd.

Points to be noted:

• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): Measures a company’s profitability before accounting for financial and non-cash expenses.
• PBIT (Profit Before Interest and Tax): Reflects operating profit by excluding interest and taxes from total revenue.
• PBT (Profit Before Tax): Indicates profit after deducting operating costs and interest but before taxes.
• Net Income: Represents the company’s total profit after all expenses, including taxes and interest, are deducted.
• EPS (Earnings Per Share): Shows the portion of a company’s profit allocated to each outstanding share of stock.
• DPS (Dividend Per Share): Reflects the total dividend paid out per share over a specific period.
• Payout Ratio: Measures the proportion of earnings distributed as dividends to shareholders.

Advantages and Disadvantages of Investing Zomato

Zomato Ltd

The primary advantage of Zomato Ltd. is its comprehensive platform that seamlessly integrates restaurant discovery, food delivery, and customer reviews, offering users a holistic dining experience.

1. Extensive Market Presence: Operating in over 1,000 cities, Zomato serves more than 80 million monthly active users, providing a vast selection of dining options and enhancing customer convenience. 
2. Diverse Revenue Streams: Zomato’s business model includes food delivery commissions, advertising, and subscription services like Zomato Pro, ensuring financial stability and supporting continuous investment in technology and market expansion. 
3. Technological Innovation: By leveraging cutting-edge technology, Zomato offers features such as contactless dining, real-time order tracking, and personalized recommendations, enhancing user experience and operational efficiency. 
4. Strategic Acquisitions: Acquisitions like Blinkit have expanded Zomato’s service offerings into quick commerce, diversifying its portfolio and strengthening its market position. 
5. Strong Brand Recognition: Zomato’s established brand and extensive restaurant network contribute to its leadership in the food delivery market, attracting a large and loyal customer base.

The main disadvantage of Zomato Ltd lies in its dependency on the food delivery segment, which is highly competitive and operates with slim profit margins. This reliance exposes the company to market pressures and operational challenges.

1. High Competition: Zomato operates in a fiercely competitive market with players like Swiggy and others, leading to pricing pressures and increased marketing costs to retain and expand its user base.
2. Thin Profit Margins: The food delivery business typically operates with low profit margins. High delivery costs and partner commissions can impact profitability, especially in regions with lower order volumes.
3. Regulatory Challenges: Zomato faces regulatory scrutiny over delivery partner working conditions and pricing practices. Non-compliance with emerging regulations can lead to fines or reputational damage.
4. Dependency on Partner Restaurants: Zomato’s success heavily depends on partner restaurants for menu variety and service quality. Poor performance or dissatisfaction from these partners can directly impact customer experience and loyalty.
5. Economic Sensitivity: As a discretionary service, food delivery demand is highly sensitive to economic fluctuations. In times of financial instability, consumers may cut back on ordering, affecting Zomato’s revenue streams.

Advantages and Disadvantages of Investing Swiggy

Swiggy Ltd

The primary advantage of Swiggy Ltd lies in its strong market presence and technological innovation, offering an extensive food delivery network, quick commerce, and ancillary services that enhance customer convenience and satisfaction across urban and suburban areas.

1. Extensive Delivery Network: Swiggy operates in over 500 cities across India, ensuring wide accessibility. Its robust delivery infrastructure enables quick service and supports a vast number of partner restaurants, catering to diverse customer preferences.
2. Diverse Service Offerings: Beyond food delivery, Swiggy has expanded into quick commerce with Swiggy Instamart and Swiggy Genie for package deliveries, providing users with a comprehensive platform for daily needs and convenience.
3. Technological Integration: Leveraging AI and machine learning, Swiggy optimizes delivery routes, reduces wait times, and offers personalized recommendations, enhancing user experience and operational efficiency.
4. Strategic Investments: Swiggy has secured significant funding from global investors like Prosus and SoftBank, enabling it to scale operations, invest in technology, and explore new markets.
5. Brand Recognition: Swiggy’s strong marketing campaigns and customer-centric approach have established it as one of India’s leading food delivery platforms, fostering customer loyalty and driving sustained growth.

The main disadvantage of Swiggy Ltd lies in its heavy reliance on the food delivery segment, which faces intense competition and operates on low margins, making profitability a challenging goal in a cost-sensitive market.

1. High Competition: Swiggy competes with major players like Zomato and emerging local startups. This intense rivalry pressures pricing, marketing expenses, and customer acquisition costs, affecting overall profitability.
2. Low-Profit Margins: The food delivery business operates on thin margins, with high costs for delivery logistics and partner commissions. This reliance on volume for profitability makes financial sustainability challenging in the long run.
3. Regulatory Hurdles: Swiggy faces regulatory issues concerning delivery personnel’s working conditions and customer protection laws. Non-compliance could lead to fines or tarnished reputation, impacting business operations.
4. Operational Costs: Maintaining a vast delivery network and expanding quick commerce operations require significant investment. High operational costs, coupled with the need for continuous technological advancements, strain Swiggy’s resources.
5. Economic Sensitivity: As a discretionary service, Swiggy is vulnerable to economic slowdowns. Reduced consumer spending during downturns directly affects order volumes, posing risks to revenue and growth prospects.

How to Invest in Zomato and Swiggy Stocks?

Investing in Zomato and Swiggy requires understanding their market presence and financial performance. Zomato is publicly traded, while Swiggy recently completed its IPO. Here’s how to invest in these companies:

1. Open a Demat and Trading Account: Choose a reputable stockbroker like Alice Blue to open a Demat and trading account. Complete the KYC process, including identity and address verification, to facilitate seamless transactions.
2. Fund Your Account: Deposit funds into your trading account through net banking, UPI, or other supported methods. Ensure sufficient balance to cover the purchase of desired shares and associated transaction fees.
3. Research the Companies: Analyze financial statements, market trends, and company news for Zomato and Swiggy. Utilize resources like Alice Blue’s research reports to make informed investment decisions.
4. Place Your Order: Use your broker’s trading platform to search for Zomato’s stock symbol (ZOMATO) and Swiggy’s stock symbol (SWIGGY). Enter the number of shares you wish to purchase and specify the order type (market or limit).
5. Monitor Your Investments: Regularly review your portfolio’s performance. Stay updated on company developments and market conditions to make timely decisions regarding holding or selling your shares.

Zomato vs Swiggy – Conclusion

Zomato stands out with its strong public market presence and diversified revenue streams, including food delivery, subscriptions, and advertising. Its strategic acquisitions, such as Blinkit, bolster its position in quick commerce, making it a robust option for long-term growth.

Swiggy excels with its expansive delivery network and diversified services like Instamart and Genie. While privately held, its focus on technological innovation and strong brand recognition position it as a key player in India’s competitive food delivery and quick commerce market.

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Disclaimer: The above article is written for educational purposes, and the companies’ data mentioned in the article may change with respect to time. The securities quoted are exemplary and are not recommendatory.