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.
