Brokerage firm UBS has lowered target prices for Eternal and Swiggy, citing rising competitive pressures in India’s quick commerce space. However, it has retained a “Buy” rating on both stocks, pointing to attractive valuations and long-term growth potential despite near-term headwinds.
Competition Heating Up Across Quick Commerce
UBS highlighted that large horizontal players such as Amazon, Flipkart, and JioMart are now fully committing to quick commerce. These companies are expected to scale aggressively, potentially expanding their dark store networks to 1,200–1,500 locations over the next 12 to 18 months.
This increased participation is likely to intensify competition, putting pressure on growth rates and margins for existing leaders like Blinkit and Instamart. UBS has accordingly reduced its projections for quick commerce performance, cutting Blinkit’s net order value estimates by 7–11 percent and Instamart’s gross order value forecasts by 17–22 percent for FY27–29.
Growth Moderation but Structural Opportunity Intact
Despite the competitive intensity, UBS noted that the situation has not deteriorated further since late 2025. Platforms have already begun adjusting strategies by raising free delivery thresholds and rationalising discounting, which is expected to support margins in the near term.
Growth moderation is being attributed to both seasonality and a deliberate shift by platforms toward balancing profitability with expansion. UBS expects a temporary slowdown in quick commerce growth in early FY27, followed by recovery in the second half of the year as supply-side constraints ease.
At the same time, the brokerage remains constructive on the long-term opportunity, noting that increased competition will likely expand the total addressable market by introducing new categories, use cases, and customer segments.
Food Delivery Remains Stable
UBS maintained that the core food delivery businesses of both companies remain stable. However, it flagged risks from LPG supply constraints and pricing volatility, which could impact restaurant operations and delivery economics in the short term.
Higher delivery costs are also expected, potentially rising by 1.5–2 percent in FY27 due to expanded delivery radii. These costs may be partially offset by recent platform fee increases implemented by both Zomato and Swiggy.
Valuation Reset but Upside Intact
UBS has revised its target prices while maintaining a positive outlook:
- Eternal: Target price cut to ₹310, implying ~32% upside
- Swiggy: Target price maintained at ₹390, implying ~42% upside
The brokerage noted that Eternal trades at a premium compared to the broader consumer sector but justifies it through significantly higher projected EBITDA growth. Meanwhile, Swiggy’s valuation is seen as conservative, with much of its quick commerce business not fully reflected in current pricing.
The Bigger Picture
The quick commerce sector is entering a new phase where capital intensity, scale, and execution will define winners. While increased competition may compress margins in the short term, it is also accelerating category development and consumer adoption.
In essence, the market is shifting from a “land grab” phase to a more disciplined growth cycle, where profitability, operational efficiency, and ecosystem strength will become the key differentiators.
