Estimates from CLSA suggest that the number of monthly active users on food delivery platforms like Zomato and Swiggy is poised to increase by over two-fold by the fiscal year 2030.
According to a note from the brokerage dated August 31, despite adopting conservative estimates and limiting the target audience to households with a disposable income exceeding $10,000 (approximately INR 8.2 lakh), the number of users is expected to more than double.
“We believe profitability of the online food delivery industry has well and truly been established, and its current duopoly nature is likely to help sustain take-rates,” it said.
It noted the concerns around user growth, specifically the volatility in Zomato’s monthly transacting users over the past four quarters. “In our view, these concerns were largely due to a reduced presence in cities, some slowdown in discretionary demand and clear prioritisation of profitability over growth.”
CLSA stated that if online food delivery platforms maintain consistent penetration across income brackets and increase their market coverage from 85% to 90% of the target audience, this would result in an 11% compound annual growth rate (CAGR) in user numbers over the next six years.
Further, a major tailwind for the sector in the second half of the current fiscal would be the Cricket World Cup set to be held in India. “It should aid demand for online food delivery, as seen in other developed nations during sporting events. We remain positive on the online food delivery space,” it said.
The brokerage has issued a ‘buy’ recommendation for Zomato Ltd., setting a target price of INR 99.6 per share, offering a minimal upside compared to its current market price.