Food delivery-turned-quick commerce giants Swiggy and Zomato have seen significant erosion in value and stock price in the past month, with Swiggy dropping by around 45% and Zomato by 30%. Pertinently, Swiggy hit its all-time low this past week before bouncing back curiously just after reports of the food delivery business being undervalued.

A lot of the pressure from sellers in the past few months has been down to the view that any profitability for these companies is short-term because of expenditures to come.

Spending and investments in quick commerce (QC) is not only for increasing market share but also fighting off Zepto and others. This has crystallised attention on this segment, but perhaps taken the eye off food delivery, which is still a strength according to one report this week.

ICICI Securities claims that the current market valuations of Swiggy and Zomato do not reflect the full scope of their businesses. The brokerage’s analysis says Swiggy is trading approximately 30% below the value of its food delivery operations alone, even without accounting for the negative implied value to its quick commerce vertical.

Even Zomato, which is a more mature stock, is not pinned to the QC business, says ICICI Securities. The brokerage claims that investor sentiment is influenced more severely by short-term financial concerns than long-term growth potential.

Food delivery has remained EBITDA profitable for both companies since mid-2023. Although growth in the segment slowed in the third quarter of FY25, the brokerage claims a boost in spending from the tax cuts in the latest budget is not unexpected.

The Contrarian View

It relies on past instances of tax cuts to base its thesis, but to play devil’s advocate, this largely depends on how discretionary spending........

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