Higher Discounts Hurt Profit Outlook; UBS Trims Valuations of Quick Commerce Firms

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.

Given the weak EBITDA outlook, UBS has also lowered its target prices for both companies. The new target price for Eternal is ₹375 and for Swiggy is ₹510.

Regarding the margin outlook, UBS stated that competition in the Indian quick commerce market has intensified since September 2025 and is expected to persist through January 2026. According to the report, analysis of discounts, channel checks, and app usage data from Sensor Tower indicates that this intense competition may further delay margin improvement in the sector.

UBS noted that discounts on quick commerce platforms have increased by an average of 200-300 basis points compared to September, and in January 2026, they are even higher than in November 2025. Among the major players, Amazon and Zepto offer the highest discounts, while BlinkIt still offers relatively lower discounts, although the level is higher than before.

On the food delivery segment, UBS said that growth is improving and competition remains stable. According to food delivery receipt data from December 2025, the industry is tracking volume growth of around 16% in the third quarter of FY2026, compared to 7% to 10% in the previous three quarters. According to UBS, this improvement is due to initiatives involving lower average order values, which have increased usage among existing customers.