Motilal Oswal sees buffet of tailwinds; upgrades Swiggy, bullish on Eternal

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MOFSL on Swiggy, Eternal: Domestic brokerage firm Motilal Oswal Financial Services (MOFSL) has turned bullish on the food delivery and quick commerce (QC) space, upgrading Swiggy to a ‘Buy’ with a target price of ₹560, implying a 32 per cent upside, while maintaining its ‘Buy’ call on Eternal with a target price of ₹420, suggesting a 29 per cent gain. 

 

After several quarters of headwinds, the analysts believe the cycle is now turning, helped by an improving consumption backdrop, rational competition, and policy support.

 

The brokerage highlighted that food delivery growth, which had slowed sharply in recent quarters due to weak consumer sentiment and macro pressures, is set to re-accelerate. Growth in gross order value (GOV) fell to around 18 per cent in FY25 from 19-20 per cent in FY23-24 for both Zomato and Swiggy. 

 

MOFSL now expects this to reverse, forecasting more than 20 per cent growth in the coming quarters, led by festive demand and the benefits of GST reforms. These reforms, the brokerage noted, should leave more disposable income in consumers’ hands, fuelling discretionary spending and boosting both dining-out and delivery volumes. 

 

As confidence returns, order frequency and platform volumes are expected to rise, and MOFSL has accordingly raised its food delivery growth estimates, projecting a 23 per cent compound annual growth rate (CAGR) in gross merchandise value (GMV) between FY26 and FY28, up from 19 per cent earlier.

 

Quick commerce, which had been in a bruising “land-grab” phase until earlier this year, is also showing signs of stabilisation. 

 

Industry view

 

Between September 2024 and April 2025, the industry witnessed a surge in competitive intensity, with platforms engaging in heavy discounting, accelerated dark store rollouts, and sharply higher customer acquisition costs. This combination weighed on contribution margins and extended payback periods. 

 

However, MOFSL points out that the industry is now transitioning to a more cost-conscious model. Discounting has started to ease as new entrants moderate their aggression and incumbents shift focus to profitability. Dark store expansion has slowed, with Swiggy prioritising asset efficiency and Blinkit leveraging its density and market leadership. 

 

Meanwhile, the lower GST burden has emerged as a structural tailwind, encouraging adoption in non-metro markets and improving unit economics. With the peak in expansion now behind, operating leverage is expected to improve steadily, bringing contribution margins closer to breakeven.

 

GST overhaul impact

 

Analysts also highlighted the GST regime’s impact on delivery fees. Under Section 9(5), platforms such as Swiggy and Zomato are now directly liable to pay GST on delivery charges levied on customers, closing a loophole that had previously led to large tax demands on the companies. 

 

While this adds a modest cost of about 0.3-0.5 per cent of Ebitda in food delivery, MOFSL believes the overall effect is limited. The broader positives of higher consumption, increased quick commerce penetration, and improved tax clarity outweigh this burden, the brokerage said.

 

Valuations

 

On valuations, MOFSL has raised its multiple for food delivery businesses to 35 times FY27 estimated adjusted Ebitda, compared with 27 times earlier. This re-rating, analysts said, reflects both the stronger top-line outlook and improved profitability visibility. The change has prompted upgraded target prices for both Swiggy and Eternal. 

 

The brokerage now values Swiggy at ₹560, capturing the inflection in food delivery growth and the path to improved economics in Instamart. Eternal’s target price of ₹420 remains unchanged, underpinned by structural tailwinds and upside to earnings.

 

“The perfect storm has given way to multiple tailwinds. We see a stronger growth outlook and faster breakeven in quick commerce, warranting upgraded multiples and valuations,” MOFSL wrote.

 

The upgrades by MOFSL analysts’ come as the food delivery and quick commerce sector prepares for its next phase of growth. With consumption set to recover, competition becoming more rational, and GST reforms creating fresh momentum, MOFSL believes both Swiggy and Eternal are well-placed to benefit materially in the years ahead.