Would prefer Zomato over Swiggy, says JM Financial

Citing Zomato’s market dominance and superior execution, brokerage JM Financial expressed a preference for Zomato over Swiggy, highlighting the challenges Swiggy may face in establishing its footing in this space.

In its report, JM Financial highlights Zomato’s leadership and execution record, suggesting it holds an edge over Swiggy despite the latter’s advances in quick commerce through its Instamart vertical. “We would prefer Zomato if asked to pick only one due to its superior execution in the past and market leadership across key segments,” the report states, positioning Zomato as the more favorable investment choice.

Swiggy’s Instamart has struggled with operational challenges, particularly as competitors like Blinkit and Zepto have gained ground. JM Financial points out that “Blinkit has achieved near-break-even,” while Instamart still faces hurdles to reach similar profitability levels.

Zomato’s acquisition of Blinkit, meanwhile, has allowed it to leverage operational efficiencies across tech and supply chains, giving it a stronger holding within the quick commerce sector. “Consolidation with Zomato later unlocked meaningful synergies on tech-stack as well as supply chain side, ensuring better control over operating costs,” JM Financial noted, underscoring the advantage this acquisition provides to Zomato.

Also read | Swiggy shares list at 8% premium over IPO price

JM Financial has assigned a target price of Rs 470 for Swiggy with a “Buy” rating, which reflects a 21% upside potential. Meanwhile, it maintains a similar “Buy” rating for Zomato with a target price of Rs 300. The brokerage suggests a higher weight on Zomato, given its consistent performance and execution strengths. “We recommend that investors play both (preferably with higher weightage for Zomato), as in any case both are likely to be among the fastest-growing consumption names,” JM Financial advises, highlighting that both companies offer promising growth within India’s evolving consumption market.

The brokerage sees both companies as important players in India’s food-tech market, but it ultimately favors Zomato’s proven market execution and operational synergies, suggesting a stronger growth potential over the medium term.

Shares of Swiggy listed with a 7.69% premium over its IPO price of Rs 390 on NSE. The company listed at Rs 420 on NSE. Meanwhile, it debuted with a premium of 5.64% at Rs 412 on BSE.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)