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Higher Discounts Hurt Profit Outlook; UBS Trims Valuations of Quick Commerce Firms
Quick Commerce: Brokerage firm UBS has expressed concern that margin recovery in the quick commerce sector will be delayed due to increased competition and increased discounting. Consequently, it has cut its quick commerce EBITDA and margin estimates for Eternal and Swiggy. Let's explore the details.
UBS, a brokerage firm, has made a substantial change to its current estimate of the quick-commerce industry. In a report released on Wednesday, UBS has cut its quick commerce EBITDA margin estimates for Eternal, the parent company of Zomato and Blinkit, by 15-20% for FY 2026-27. Swiggy's quick commerce margin has also been reduced by 100-120 basis points.
EBITDA, which stands for Earning Before Interest and Taxes and Depreciation and Amortization, can be defined as a profitability ratio that measures how much a company earns relative to its revenue, excluding interest, taxes, depreciation, and amortization.
This comes a day after the government asked major food delivery aggregators to remove the obligatory 10-minute food delivery deadline. According to UBS, the recovery of margins in the quick commerce sector may be postponed by a couple of quarters because of increased competition and discounts.
However, UBS also made it clear that the estimates for gross order value (GOV) and net order value (NOV) for Swiggy have been held unchanged, whereas the estimates for Eternal's GOV and NOV have been modestly increased. Additionally, estimates for GOV, NOV, and adjusted EBITDA for the food delivery business in FY2028 have been kept largely unchanged.
