Bank of America Securities (BofA Securities) cut investment ratings for Swiggy and Zomato. File
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Bank of America Securities (BofA Securities) cut investment ratings for Swiggy and Zomato as the profitability of the two quick commerce companies are not expected to improve in the coming year, according to its research note.
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Zomato was downgraded to neutral from buy and Swiggy to underperform from buy as the two companies are expected to lag BofA’s adjusted EBITDA consensus.
Investment ratings are given by stock market researchers to indicate the action that an investor needs to take. Stocks that are cheaper than expected are given buy, and more expensive than expected, sell.
BofA Securities cited underperformance of BofA estimates of adjusted Earnings before Interest, Tax, Depreciation and Amortisation (EBIDTA), a measure of profitability from core operations, rising competition and multiple deratings in the year.
BofA estimated a profit of ₹1,600 crore for fiscal 2026, which is 23% lower than the consensus for Zomato. Swiggy is expected to have a loss of ₹1720 crore, more than the expected ₹1110 crore, according to data in the research report.
“Based on consensus expectations and our interaction with investors, we believe that (1) most investors expect 4Q quick commerce losses to be higher than 3Q”, BofA said adding that the loses may narrow after the fourth quarter. However, a fast recovery is not expected in the segment, said Bofa. higher competition means more spending on marketing, customer discounts, higher rental fees for dark stores and consequently more higher costs, the report read. Analysts also were not certain about the demand in tier two and tier three cities in the short run. Zomato however is expected to perform better than Swiggy due to first mover advantage among other reasons.
Following the report, Swiggy stocks closed at ₹324.5 a share nearly 3.9% below the previous close on the National Stock Exchange. Zomato was down by a softer 2.5% to ₹204.5 a share on NSE.
The benchmark Nifty was down 0.77% to 23,486.85.
Published – March 26, 2025 06:01 pm IST
