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Eternal & Swiggy: Deja Vu?

Another round of competition looms, but this time could be different

Both Eternal and Swiggy have seen improvements in their profitability on the back of reduced competitive intensity and slower dark store rollouts over the past couple of quarters. Commentary in 2QFY26 earnings calls, however, indicated that this trend could see a pause. Swiggy, armed with a potential INR100b in fresh funds, Zepto’s recent fundraise, and Eternal’s strong balance sheet could set off another land-grab phase in quick commerce (QC). This resembles the setup seen last year (see Exhibit 5). Nov’24 saw the beginning of a competitively intense phase in QC, as both listed and unlisted players ramped up dark store expansions and marketing expenses, leading to steep cuts in margin expectations. We argue, however, that this time is slightly different. Dark store additions will be lower for both platforms, particularly Swiggy, which is moderating new launches by ~90% after last year’s aggressive buildout. In the past cycle, Swiggy’s throughput (orders per day per dark store) declined by 25%; we expect its throughput to improve by 30% over the next four quarters. This is a key margin lever, in our view. For Eternal, the network remains efficient and its QC business is near the breakeven – the losses were entirely driven by discretionary marketing spends. Thus, while competitive intensity may come back, operating leverage could still play out, especially for Swiggy, which has low dark store utilization. In summary, we believe that the food delivery (FD) business will remain a balanced duopoly between Eternal and Swiggy, with 20-22% GOV growth over FY26–27. We value the FD business at 30x FY27E EBITDA. In QC, the setup looks similar to the prior cycle, though with lower burn intensity and faster margin normalization as dark-store throughput improves. Swiggy remains our preferred pick on relative valuation comfort as its 0.5x FY27E EV/GMV multiple still trades at a ~60% discount to Eternal’s 1.2x. We reiterate BUY on Swiggy with a TP of INR550 (36% upside) and Eternal with a TP of INR410 (27% upside).

2QFY26: Competitive intensity to be cranked up again

* After a couple of quarters of low competition, all players have shifted their focus back to growth. This feels familiar to the high competitive intensity seen between Sep’24 and Apr’25, when expectations for QC profitability were downgraded.

* What changed this quarter:

1. 1QFY26 commentary:

* Market expectations and guidance for improvement in profitability on the back of easing competitive intensity.

2. 2QFY26 commentary:

* The tone turned more aggressive, with renewed push for discounts and brand marketing.

* Swiggy launched its ‘Quick India’ campaign, undertook a brand refresh, and rolled out reactivation drives (Exhibit 2).

* Eternal reintroduced free Zomato Gold promos and large-scale food offers.

* Both Swiggy and Zepto also launched ‘No Fee’ campaigns (removing delivery, handling, and surge fees, see Exhibits 1 & 2).

* As a result, we are back where we were in Nov’24: all the top players are expected to increase competitive intensity on the back of fresh capital raises.

Parallels to 2024: Cash burn back on the table? Partially

* The current setup mirrors FY25’s growth pivot, but the underlying context this time is different.

* Nov’24 saw the beginning of a land-grab phase in QC (see Exhibit 5), as both listed and unlisted players ramped up dark store expansions and marketing expenses, leading to steep cuts in margin expectations.

* This reflected in stock prices: Eternal and Swiggy corrected 21% and 27%, respectively, between November ’24 and Mar’25. Prices have since rebounded handsomely, reflecting improved profitability in 1Q and 2QFY26 for both players.

* Fundraising and high discounting intensity cloud the outlook for margin expansion again.

This time is different: Operating leverage from increasing throughput

* Despite signs of rising competition, this cycle is structurally more measured.

* Dark store additions will be lower for both platforms, particularly Swiggy, which is moderating new launches after last year’s aggressive buildout. In the past cycle, Swiggy’s throughput (orders per day per dark store) declined by 25%. We expect its throughput to improve by 30% over the next four quarters. This is a key margin lever, in our view.

* Most newly opened dark stores are already past the 4-6 month breakeven window, allowing incremental operating leverage.

* For Eternal, the network remains efficient and its QC business is near the breakeven; the losses are entirely driven by discretionary marketing expenses.

Valuation and view

* We continue to view FD as a stable duopoly with balanced market shares between Eternal and Swiggy. We model 20-22% GOV growth over FY26-27 and assign a 30x EV/EBITDA multiple to the FD business, reflecting its steady margin trajectory and high user stickiness.

* In QC, the setup looks similar to the prior cycle, though the burn intensity is lower and incremental margins should normalize faster as dark-store throughput improves. At the current juncture, we prefer Swiggy on relative valuation comfort — our implied EV/GMV multiple of 0.5x FY27E for QC represents a ~60% discount to Eternal’s 1.2x, and expect this discount to narrow. Sustained improvement in Swiggy’s AOVs, dark store throughput, and take rates could drive a meaningful profitability re-rating ahead.

* We reiterate our BUY rating on Swiggy with a TP of INR550, implying a potential upside of 36%, supported by steady FD growth and improving QC unit economics. We also maintain our BUY rating on Eternal (Zomato) with a TP of INR410 (27% upside), as we continue to see structural tailwinds in QC expansion, and execution scale.

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