India’s burgeoning quick commerce sector is poised for significant growth as Zomato’s Blinkit and Swiggy Instamart ramp up order volumes and expand their store networks in the fourth quarter of FY25. However, analysts from JP Morgan caution that the timeline for achieving profitability may extend beyond initial projections.

Shift in Profitability Timeline

JP Morgan has adjusted its forecasts, moving the anticipated EBITDA break-even for both companies from Q2 FY26 to Q3 FY26. This delay is attributed to a decrease in contribution margins, which could counterbalance the impact of increased order volumes. Analysts Ankur Rudra and Bhavik Mehta note, “While the network age is decreasing and more cities are being served from remote warehouses, a balance must be struck with moderating subsidies and rising basket sizes, leading to a one-quarter extension in profitability timelines.”

Key Insights on Market Trends

• Subsidy Adjustments: Analysts observe that subsidy levels are beginning to stabilize.
• Average Order Values: There’s a positive trend in average order values (AOVs), with larger basket sizes becoming more common.
• Expansion Plans: Both Blinkit and Swiggy Instamart are expected to add around 300 new dark stores each, enhancing their market presence.

Food Delivery Outlook

In the food delivery segment, JP Morgan forecasts a slight decline in gross order value (GOV) for Zomato, estimating a 2.5% decrease quarter-on-quarter, while Swiggy may see a 1% dip. Despite these decreases, contribution margins are projected to improve by 20 basis points for both platforms. The overall moderation in food delivery GOV, combined with the delayed profitability for quick commerce, may result in 2-18% EBITDA cuts for Zomato over the FY25-27 period.

Quick Commerce Projections

On a more promising note, quick commerce performance looks robust. Blinkit is expected to experience a 29.5% increase in GOV quarter-on-quarter, whereas Instamart is anticipated to jump by 33% in Q4. However, both platforms are facing challenges with contribution margins: Blinkit’s margin may decline by 20 basis points to 2.8%, and Instamart could see a significant drop of 330 basis points to 7.9%.

Competitive Landscape

In the race for market dominance, Blinkit appears to be leading with its rapid growth and extensive dark store expansion, despite incurring higher losses in Q3. This strategic approach has enabled it to secure the largest market share. Conversely, Swiggy Instamart is experiencing steady growth but is grappling with margin pressures due to aggressive expansion and discounting strategies. In its Q3 earnings report, Swiggy acknowledged that its investments in quick commerce have negatively impacted contribution margins, which fell from (-1.9%) in Q2 FY25 to (-4.6%) in Q3.

As the quick commerce landscape evolves, both Zomato and Swiggy are navigating challenges and opportunities that could shape their futures in this competitive arena.