Swiggy IPO vs Zomato share: Which one do analysts recommend?

Swiggy and Zomato hold almost a duopoly in India's online food delivery business, with Zomato having an edge in terms of market share and profitability

The highly-anticipated ₹11,327.43 crore initial public offering (IPO) of food delivery giant Swiggy will open on Wednesday, November 6, 2024.

What separates them the most is the fact that Zomato has turned profitable while Swiggy still isn't, having faced recurring losses for the last three years.

Swiggy though is not the only player in this space, having a well-established rivalry with the already-listed Zomato Ltd. These two hold almost a duopoly in India's online food delivery business, with Zomato having an edge in terms of market share.

Zomato went public in July 2021, with its market cap more than doubling since from $13 billion ( ₹1.07 lakh crore) back then to over $25 billion ( ₹2.14 lakh crore) as of November 2024, according to a Mint report.

However, what separates them the most is the fact that Zomato has turned profitable while Swiggy still isn't, having faced recurring losses for the last three years.

Swiggy Vs Zomato: Which one to buy?

The report quoted Akriti Mehrotra, Research Analyst at StoxBox as saying that Zomato has a competitive advantage due to its size, profitability, and better growth indicators.

“Zomato exhibits higher market traction with a robust gross order value CAGR of 23.0% as opposed to Swiggy’s 15.5%. Its average order value growth also surpasses Swiggy’s, underscoring its operational effectiveness," the report quoted her as saying. “Although the upcoming Swiggy IPO offers a chance for expansion, it is unclear how well it will be able to use its resources to close the gap with Zomato.”

Similarly, the report quoted Anshul Jain, Head of Research at Lakshmisgree Investment and Securities as saying that Zomato is better placed in terms of profitability.

“A major portion of Swiggy IPO comprises OFS, giving exit to early investors at high prices. Swiggy has been incurring losses and there is uncertainty around its profitability," the report quoted him as saying and setting a stock price target of ₹550 apiece for a two-year perspective. “At almost same revenue, Zomato is making profit and Swiggy is making losses.”

Jathin Kaithavalappil, Assistant Vice President, Choice Broking is quoted to have said that though Swiggy's IPO valuation is well-priced, it isstill reporting losses and its cash flows are negative.

“Swiggy also faces stiff competition from Zomato, among others. Swiggy commands about 45% market share in food delivery, but only about 25% in quick commerce. Therefore, there is uncertainty surrounding Swiggy’s way to profitability," the report quoted Kaithavalappil as saying. "Zomato is offering proven scale and profitability with solid metrics, such as gross order value (GOV) and average order value (AOV), which makes it the more stable choice in the short term.”