Is India’s Food Delivery Market Poised for 13-14% Growth in the Coming Years?
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Synopsis
The Indian food delivery market is on the brink of a significant transformation, set to achieve a remarkable growth rate of 13-14% in the coming years. With the competitive landscape evolving and companies focusing on optimizing their assets, investors are keenly observing this sector's potential.
Key Takeaways
- Projected growth rate of 13-14% for the food delivery market.
- Stable EBITDA margin expected to be 5%.
- Moderating competitive intensity in quick commerce.
- Focus on asset utilization and customer retention.
- Potential decrease in corporate-level costs from 5% to 2-3% percent over the next few years.
New Delhi, July 12 (NationPress) The food delivery sector in India is anticipated to experience a growth rate of 13-14 percent in the following years, accompanied by a stable EBITDA margin of 5 percent. This insight comes from a recent report, which also highlighted that the competitive intensity within quick commerce is easing, potentially propelling stock performance in the near future.
Competitive pressure in the quick commerce arena appears significantly more manageable compared to six months ago.
“While there is still an abundance of capital available for most market players, as mentioned in our previous analysis, the advantages of high cash burn are beginning to wane,” the HSBC Global Investment Research report stated.
Businesses are now likely to concentrate on enhancing the utilization of their existing assets and achieving a high retention rate of customers acquired over the last year.
“In general, we believe that growth in the near term is likely to remain robust, and profitability should gradually enhance as well,” the report further elaborated.
In recent quarters, variable costs, such as salaries for pickers and delivery partners, have risen, but “we have observed some stabilization recently in the cost trends of dark stores.”
Currently, corporate-level expenses (management and technology) account for approximately 5 percent of the gross order value (GOV), which “we anticipate could decrease to 2-3 percent within the next 4-5 years as the business scales up.”
Discussions among key investors continue to center around the valuation benchmarks for this industry.
“Given the duopoly structure of the industry and the low reinvestment rate, we believe that valuations for Zomato should align with the average of other consumer discretionary companies in India,” the report emphasized.
Most discretionary companies in India trade within an EV/EBITDA range of 15-60x. Therefore, “we apply a 40x EV/EBITDA target multiple for Zomato. The company also possesses significant tax assets, making it appear more affordable than its peer group when assessed on a price-to-earnings (PE) basis,” the HSBC report concluded.
Point of View
I believe this report highlights a crucial phase for India's food delivery market. The projected growth indicates a shift towards stability and profitability, which is essential for sustainable development in this sector. As we continue to track these trends, we remain committed to providing accurate and insightful coverage that keeps our audience informed on national economic developments.
NationPress
13/07/2025
Frequently Asked Questions
What is the projected growth rate for India's food delivery market?
The food delivery market in India is expected to grow by 13-14% in the coming years.
What is the expected EBITDA margin for this sector?
The EBITDA margin for the food delivery sector is anticipated to stabilize at around 5%.
How is the competitive landscape changing?
The competitive intensity in quick commerce is moderating, which is likely to support stock performance.
What cost trends are affecting the industry?
While variable costs have increased, there has been recent stability in the costs associated with dark stores.
What valuation benchmarks are being discussed?
Valuations for Zomato are expected to match the average of other consumer discretionary companies, applying a 40x EV/EBITDA multiple.
