Sharp contrast! How Swiggy & Eternal, India's top e-commerce stocks, are outshining Chinese counterparts
Swiggy and Eternal (
Zomato
's parent firm), India's leading Indian e-commerce stocks, have surpassed domestic indices and Asian counterparts - China included - in the previous month, with swift recovery driving speculation about their competitive edge and earnings potential.
Quick commerce is transforming India's digital retail sector, with organisations competing in a market that Bloomberg Intelligence projects could reach $100 billion by 2030. The sector offers delivery of essential items including groceries and personal care products in approximately 10 minutes.
Swiggy, Eternal Outshine Chinese Peers
Swiggy Ltd. shares rose 20% in the past month, surpassing the NSE Nifty 100 Index, whilst Eternal Ltd. gained 11%.
The surge in India's expanding quick-commerce sector, delivering everyday necessities within minutes, stands in stark contrast to Chinese counterparts, where aggressive pricing competition has affected food-delivery companies negatively.
Despite Amazon.com Inc. and Walmart Inc.'s Flipkart India Pvt. entering the market, experts believe existing players Swiggy, Eternal, and privately-held
Zepto
will maintain their market positions, owing to their established supply chains and early market presence.
"Established players have shown they can manage delivery costs effectively, especially in paying and utilizing riders efficiently," said Nirav Karkera, a fund manager and head of research at Fisdom. "New entrants, however, will still need to prove they can do this in a sustainable way," he told Bloomberg.
Currently, Eternal's
Blinkit
, Swiggy's Instamart and Zepto jointly hold about 88% of India's quick-commerce market share, according to JM Financial Ltd. data. Since its 2022 acquisition by Eternal, which also owns food-delivery service Zomato, Blinkit has dominated the segment.
In China's market landscape, the e-commerce delivery industry faces intense competitive pressures. Market leaders Meituan and JD.com Inc. have experienced a significant decline, with their combined market valuation dropping by more than $70 billion from March peak levels.
India's Expanding E-Commerce Space
Major e-commerce companies have made substantial investments to broaden their network of warehouses and "dark store" distribution centres across numerous cities.
This expansion strategy, coupled with competitive pricing to attract customers, has impacted their profit margins.
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The established companies are likely to reduce such expansive investments this year, enabling them to concentrate on improving profitability. Meanwhile, newer competitors must continue investing to establish their market presence. The leading companies are also enhancing revenue generation by promoting higher-value orders and introducing paid supplementary services.
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Digital retail platforms are increasing their minimum order requirements, implementing more strategic discount policies and concentrating on strengthening their financial performance, according to JM Financial analysts, including Swapnil Potdukhe, in their June 26 report. "Losses may have already peaked" for both Blinkit and Instamart, they noted.
Challenges in Indian E-Commerce
The Indian market presents ongoing difficulties. According to JM Financial's research, Zepto has gained substantial market share, primarily at Instamart's expense.
Despite Swiggy's continued unprofitability, analyst confidence has grown, with the proportion of buy recommendations reaching its highest point since its late 2024 market debut.
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Investment expert Karkera from Fisdom suggests that Zepto's anticipated stock market entry could redirect some investments away from Eternal and Swiggy. However, all companies are expected to benefit from the expanding market opportunities.
"The incumbents continue to stretch their lead in users as well as in store networks, despite lowering discounts and levying delivery and handling fees," said Aditya Soman, an analyst at CLSA Ltd. "We remain positive on the quick-commerce opportunity. We believe there is enough room for the incumbents and a couple of new entrants."
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