New Delhi,– India’s food delivery market is poised for 13–14% annual growth in the coming years, driven by stabilizing competition in the quick commerce segment and improving operational efficiencies, according to a new HSBC Global Investment Research report.
The study also projects a steady-state EBITDA margin of 5% for the sector as companies shift focus from aggressive expansion to sustainable growth.
Competitive Landscape Eases in Quick Commerce
The report notes a moderation in competitive intensity in the quick commerce space compared to six months ago. While capital availability remains strong for most players, the marginal benefit of high cash burn is waning, prompting firms to prioritize profitability and customer retention.
“Companies are now more focused on optimizing existing infrastructure and ensuring high retention rates for users acquired over the past year,” the report said.
This strategic shift is expected to support continued growth in the short term, while also gradually improving margins.
Cost Structure Stabilizing
Variable costs — such as picker and delivery partner wages — have risen over the past few quarters. However, dark store operational costs have shown signs of stability.
Corporate-level expenses, including management and tech costs, currently stand at about 5% of Gross Order Value (GOV), but HSBC estimates that these could reduce to 2–3% over the next 4–5 years as the industry scales.
Valuation Outlook: Zomato in Focus
Investor attention is now turning to valuation metrics for leading players like Zomato, particularly given the industry’s evolving dynamics.
“With a duopoly market structure and minimal reinvestment requirements, we believe Zomato’s valuation should align with the average of India’s consumer discretionary companies,” the report stated.
Currently, most discretionary firms in India trade at EV/EBITDA multiples between 15x and 60x. HSBC has assigned a 40x EV/EBITDA target multiple to Zomato, noting that the company’s substantial tax assets also make it more attractive on a price-to-earnings (PE) basis relative to peers.
Outlook: Strong Growth, Improving Profitability
HSBC expects India’s food delivery and quick commerce ecosystem to sustain robust growth, supported by operational discipline and a maturing market.
“Near-term growth remains strong, and we foresee profitability improving steadily as companies shift away from cash burn toward efficient scaling,” the report concluded. (Source: IANS)
