BofA Downgrades Zomato, Swiggy Amid Rising Competition

Food Delivery Giants Face Growth Challenges

Bank of America has lowered its ratings on Zomato and Swiggy, citing concerns about slowing growth in food delivery and increasing competition in quick commerce.

BofA Cuts Ratings and Target Prices

The brokerage downgraded Zomato from ‘buy’ to ‘neutral’ and Swiggy from ‘buy’ to ‘underperform’. Along with the rating cut, BofA has also reduced the target price for both companies:

Zomato: Rs 300 → Rs 250

Swiggy: Rs 420 → Rs 325

Despite the downgrade, analysts remain positive about their medium-term prospects.

Intense Competition in Quick Commerce Hurts Margins

The quick-commerce industry, once seen as a high-growth and profitable sector, is now struggling due to rising losses and stiff competition. New players are entering the market, leading to:

Increased platform discounts

Higher marketing expenses

Lower delivery charges for consumers

Why Zomato Has an Edge Over Swiggy

Between the two food-tech giants, Zomato is in a stronger position due to:

Larger scale and first-mover advantage in quick commerce

Stronger financials and better profit margins

Healthier cash reserves

On the other hand, Swiggy is grappling with higher losses, especially in its quick-commerce segment.

Rising Costs and Market Expansion Challenges

As competition heats up, both Zomato and Swiggy are expanding their services and investing in 10-minute in-house cafe models. However, this is leading to higher operational expenses, including:

Increased rental costs for dark stores

Higher wages for delivery partners

Marketing and promotional expenses

Moreover, the brokerage does not expect significant platform fee hikes, as demand growth is slowing.

Stock Performance: Zomato vs. Swiggy

In the past 12 months:

Zomato’s stock gained 11% but has fallen 26% in 2025 so far.

Swiggy’s stock has declined 38% year-to-date.

Final Thoughts

The food delivery and quick-commerce sectors are undergoing a major shift. While Zomato appears to be better positioned, both companies face challenges from rising costs and aggressive competition. With new players disrupting the market, the next 12 to 15 months will be crucial in shaping the future of these platforms.