Strong growth metrics gives food aggregator Zomato an edge over Swiggy

The latest update on unlisted Swiggy by its largest investor, Prosus, indicates that Zomato is growing faster.

Prosus estimates that Swiggy’s overall gross order value (GOV) of food delivery and quick-commerce grew by 26 per cent year-on-year (YoY), which was way behind listed Zomato’s growth of 36 per cent during the same period.

Swiggy’s overall revenue growth of 24 per cent YoY was also lower than Zomato’s adjusted revenue growth of 55.9 per cent YoY.

Swiggy’s trading losses reduced to $158 million during FY24 while Zomato reported positive operating profit of around $5 million during FY24. Swiggy had 387,000 active delivery partners versus 418,000 for Zomato and Swiggy Instamart had 487 active dark stores compared to 526 for Zomato’s Blinkit.

Zomato is also reportedly in talks to acquire One97 Communications’ (Paytm) movie ticketing and events business. The claimed valuation is between Rs 1,600-2,000 crore, which is roughly 0.9-1.2 times FY24 sales.

India’s organised live event market was valued at Rs 8,800 crore in CY23, according to FICCI and estimated to see an annual ticketing growth of 17.6 per cent during CY23-26, according to E&Y. 

The online ticketing market for live events (sports & concerts) is valued at Rs 9,900 crore, and it grew at an annual rate of 50 per cent during the last two years.

The live events and ticketing business may report healthy double-digit growth, due to acceptance of live events in tier II markets, higher ticketing revenue including price hikes, new sports events like Women’s Premier League (WPL), Pro-Kabaddi League (PKL), and Indian Super League (ISL), international events, and rising per capita income.

Zomato’s existing live event business -- Zomato Live -- is currently posting a revenue run-rate of Rs 350-400 crore (annualized from Q4FY24 revenues), with an approximate 4 per cent market share of live events, and no online presence.

Competitors in live and online include Bookmyshow.

This acquisition would add around 14-15 per cent of revenues if it occurs but valuations may not move much as the valuation of live events & ticketing is much lower than food delivery and Blinkit. Further, due to the market being more fragmented, with many competitors, there could be lower margins.

Zomato reported a consolidated net profit of Rs 350 crore in FY24 which is slated to grow 3 times to Rs 1,170 crore in FY25. The potential bottomline of Paytm Live would be a key monitorable. The company has a cash pile of Rs 12.400 crore and therefore, the potential acquisition of Paytm Live will not stress the balance sheet. Quick commerce (both Blinkit and Instamart) are growing much quicker than e-commerce, and over 9,500 items are being delivered by Q-commerce.

Swiggy filed its DRHP with SEBI for an IPO in April. The Bengaluru-based company plans to raise up to Rs 3,750 crore (around $450 million) through a fresh issue and another Rs 6,664 crore (around $800 million) as an offer-for-sale (OFS) component.

Brokerages will inevitably compare the two businesses, given the one-to-one comparisons in food delivery and Q-commerce. Zomato seems to hold an edge, and most analysts have “Buy” recommendations on Zomato.