Mutual funds invested ₹3,100 crore in Swiggy’s IPO while trimming Zomato stakes.
High valuations hurt Zomato’s appeal despite strong revenue growth.
Swiggy emerges as the underdog on a transformation journey as Zomato trades at expensive levels.
As the quick commerce sector gathers limelight to emerge as the ‘hot’ property on Dalal Street, its sparking a rejig in investment portfolios. Mutual funds, once heavily parked in Zomato parent, Eternal are now quietly shifting bets, booking profits from the high-flying stock and redeploying capital into rival Swiggy, the perceived underdog trading at far more reasonable valuations.
While shares of Zomato have spearheaded gains with its over 40% surge in the last six months, rival Swiggy has trailed far behind with just 14% gains. However, the sharp uptick in Eternal’s shares have ballooned its price-to-equity ratio to 145.74, arguably the highest among Nifty 50 stocks.
With growing voices warning against the elevated valuations of Zomato, mutual funds have been booking profits off the counter in the shadows. In July, mutual funds dumped shares of Zomato parent, worth around ₹1,700 crore, making it one of the biggest exits by DIIs for the month, data from Nuvama Alternate and Quantitative Research showed. In stark contrast, they poured in ₹1,400 crore into Swiggy, lapping up the stock to ride on the wave of the quick commerce boom, at much cheaper valuations, Nuvama data revealed.
ICICI Prudential and Mirae Asset led the selling spree, trimming over ₹800 crore each off Eternal shares. Meanwhile, Axis Mutual Fund, Motilal Oswal, and HDFC swam against the tide, selectively adding exposure. On the other side, Swiggy saw fresh inflows of nearly ₹1,400 crore, with Mirae Asset, HDFC, SBI, Bandhan, and Invesco mutual funds among key buyers.
Swiggy Vs Eternal: What Do the Numbers Say
Swiggy and Eternal may be racing on the same turf, but their financial trajectories have moved at different angles. Both players clocked strong growth in operating revenue during Q1 FY26. Swiggy’s revenue surged 54% year-on-year to ₹4,971 crore, while Eternal outpaced with a 70% jump to ₹7,167 crore. But while Zomato held onto profitability, Swiggy’s losses nearly doubled.
Swiggy reported a net loss of ₹1,197 crore in the quarter, up from ₹611 crore last year, reflecting heavy spending on growth and Instamart. Eternal, in contrast, managed a net profit of ₹25 crore, though sharply down from ₹236 crore a year earlier as it poured investments into Blinkit.
Quick commerce remains the battleground for both firms. Blinkit’s losses widened to ₹162 crore, largely on account of its aggressive dark store expansion, more than doubling its network to 1,544 in Q1 from 639 a year ago. Sequentially, however, losses moderated while revenues spiked 155% to ₹2,400 crore. Its gross order value (GOV) almost doubled year-on-year to ₹11,821 crore, with average order value (AOV) holding steady at around ₹669.
Swiggy’s Instamart is still bleeding heavily, with losses swelling to ₹797 crore from ₹280 crore a year ago. Yet, the pace of burn appears to be flattening, quarter-on-quarter losses rose just 3.3% as the company slowed dark store rollouts.
The first quarter numbers underline the divergence. Eternal is leaning on profitability while betting big on Blinkit, whereas Swiggy is still deep in the red but showing early hints of stabilising its quick commerce play.
Brokerage Verdict
While the Street loves Eternal for its industry-leading show, Swiggy is fast emerging as a underdog turnaround story in the making. With that, brokerages are beginning to warm up to Swiggy as a contrarian play.
Brokerage firm Jefferies upgraded Swiggy to a ‘buy’, pointing that its Q1 profitability marked the trough and expects easing competition ahead. Meanwhile, Morgan Stanley had initiated coverage on the stock with an ‘overweight’ call, betting big on the company’s solid growth prospects.
The brokerage had rested its thesis on three key pillars, Swiggy’s strengthening performance in food delivery, the large and growing addressable market in quick commerce, and a mismatch between investor assumptions on capital outlay versus topline growth.
According to the brokerage, the food delivery landscape in India is expected to remain a two-player arena. As Swiggy tightens its execution, Morgan Stanley believes the company could close the profitability gap with its rival, Eternal, in this segment.
A bullish outlook for Swiggy across the board doesn’t tarnish the growth prospects for Zomato either, since most brokerages believe the scope of quick commerce is big enough for both to grow side-by-side.
“Zomato has shown stellar growth in the last few years driven by low penetration. We expect strong growth over the next few years as well, driven by order frequency and increase in customer base,” Nuvama Institutional Equities wrote in its note.
