New Entrants May Intensify Short-term Competition, but Have Not Yet Rewritten the Logic of India’s Food Delivery Duopoly

Overview

India’s food delivery market has long been dominated by Zomato under Eternal Limited and Swiggy Limited. The industry’s steady growth, high margins, and asset-light model have attracted new entrants such as Rapido and Flipkart, but market expansion needs to balance demand for low-ticket-size orders, delivery costs, rider utilization, and customer experience. Bernstein believes that new platforms can create competitive pressure in the short term through financing and subsidies, but their long-term sustainable unit economics remain unclear.

Core views

India food delivery has the conditions to expand its total addressable market, but also faces the constraint that low-ticket-size orders are difficult to cover fulfillment costs. Rapido may improve rider utilization by sharing two-wheeler ride-hailing capacity, while Flipkart may adopt lower commissions. However, whether riders and vehicles can be efficiently reused across scenarios, whether meal-time peaks and mobility peaks are complementary, and whether service quality can be maintained all remain to be verified. Even if a new model finds a cost optimization solution, incumbent platforms may quickly replicate it. Therefore, the main near-term risk comes from aggressive subsidies when new entrants have ample funding, rather than a structural cost disruption that has already been proven.

Analysis framework

The report analyzes the industry from three dimensions: industry attractiveness, market penetration potential, and unit economics. It breaks down per-order costs into delivery, other direct costs, indirect costs, and adjusted EBITDA. It also combines average order value, city distribution, user scale, and potential cost savings to assess whether new entrants can establish a sustainable advantage. For Eternal Limited and Swiggy Limited, it uses a sum-of-the-parts valuation.

Methodology notes

• Industry Structure AnalysisTotal Addressable Market and Penetration Analysis

  Assesses the expansion potential of the food delivery market through the share of the food services market, transacting users, average order value, and city coverage.

  Food delivery already accounts for more than 15% of India’s food services market, but monthly transacting users remain limited, and the top 20 cities account for only about 30% to 40% of the organized food services market. Low-ticket-size orders and non-core cities may become sources of incremental growth.

• Operating AnalysisUnit Economics Analysis

  Breaks down per-order revenue and fulfillment, discounts, payments, customer service, marketing, technology, and personnel costs item by item.

  The report uses Zomato’s per-order cost structure of about INR 132 in the first quarter of FY2027 as the basis to estimate the actual room new entrants can use to pass benefits to restaurants or consumers.

• Competitive AnalysisReplacement Cost and Tobin’s Q Analysis

  Compares the valuation of existing businesses with the replacement cost formed by historical investments to judge the industry’s apparent attractiveness to potential entrants.

  The two incumbent platforms invested about USD 4 billion to 5 billion cumulatively in food delivery before listing, while the combined valuation of their food delivery businesses is about USD 20 billion, corresponding to a Tobin’s Q of about 4 to 5 times.

• Valuation AnalysisSum-of-the-parts Valuation

  Values food delivery, quick commerce, and other businesses separately, then aggregates them to derive the company target price.

  Eternal Limited’s food delivery business is valued at 35x FY2029 adjusted EBITDA, and Blinkit at 30x FY2030; Swiggy Limited’s food delivery business is valued at 35x FY2029, and Instamart at 25x FY2030.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Eternal Limited (ETERNAL.IN)

  A leader in India food delivery; its Zomato is one of the main subjects analyzed in this report.

  Strengths

  It has mature user and restaurant networks, its delivery business is growing 18% to 20% year on year, it can pass through part of direct costs via platform fees, has strong profitability, and also owns businesses such as Blinkit, Going Out, and Hyperpure.

  Weaknesses

  The net average order value for food delivery is about INR 400, with limited coverage of the low-ticket-size market; subsidies from new platforms may depress order growth and increase promotional pressure.

  Comparison

  Together with Swiggy, it forms a stable duopoly, with scale and user habits superior to new entrants; the report assigns it a target price of INR 350.

  Risks

  Regulatory and tax changes, antitrust allegations, intensifying quick commerce competition, disruptions to the rider ecosystem, and long-term declines in industry margins.

• Swiggy Limited (SWIGGY.IN)

  One of India’s food delivery duopoly players, while also operating quick commerce businesses such as Instamart.

  Strengths

  It has a mature delivery network and user base, and is testing new business models and unit economics for the low-ticket-size market through Toing.

  Weaknesses

  Monthly transacting customers are fewer than Zomato’s, and it also faces subsidies from new platforms, low-commission strategies, and margin pressure.

  Comparison

  Compared with Zomato, its monthly transacting customer scale is smaller, but it has the ability to replicate effective cost innovations; the report assigns it a target price of INR 430.

  Risks

  Downward revisions to order growth forecasts, quick commerce competition exceeding expectations, fluctuations in rider supply, increased subsidies, and failure of new models to generate positive unit economics.

Key data

• Industry Growth18% to 20% year on yearCurrent growth level of India’s food delivery business.
• Industry Adjusted EBITDA MarginAbout 5%The report states that this is at a relatively high global level.
• Combined Valuation of Existing BusinessesAbout USD 20 billionRefers to the combined valuation of Eternal Limited’s and Swiggy Limited’s food delivery businesses.
• Historical Investment and Replacement Cost ReferenceAbout USD 4 billion to 5 billionThe cumulative financing and investment by the two platforms in the food delivery business before listing.
• Annual Transacting CustomersAbout 85 million to 95 millionCombined basis for Zomato and Swiggy.
• Monthly Transacting CustomersZomato 27.2 million; Swiggy 19.2 millionShows that coverage of active market users still has room to expand.
• Net Average Order Value for Food DeliveryAbout INR 400The average order value of India’s overall food services market is about INR 150.
• Delivery CostAbout INR 60 to 65/orderIncludes last-mile delivery, recruitment, and onboarding costs.
• Other Direct CostsAbout INR 25 to 30/orderIncludes platform subsidies, payment gateways, customer service, and refunds.
• Indirect CostsAbout INR 18/orderIncludes advertising and promotion, technology, cloud services, and personnel expenses.
• Adjusted EBITDAAbout INR 23/orderBased on Zomato’s FY2027 first-quarter basis.
• Potential Releasable RoomAbout INR 20 to 30/orderComes from delivery costs, indirect costs, and lower per-order profit requirements, and can ultimately be allocated between restaurants and consumers.
• Net Order Value Growth ForecastZomato: 20% in FY2027, 18% in FY2028; Swiggy: 17.6% in FY2027, 17.4% in FY2028If challengers compete aggressively, related forecasts may come under pressure.
• Target PriceEternal Limited: INR 350; Swiggy Limited: INR 430Both are based on sum-of-the-parts valuation.

Impact & implications

For Eternal Limited and Swiggy Limited, the near-term impact depends on challengers’ funding scale and subsidy intensity, and net order value growth forecasts may face downward pressure. In the long term, if new platforms cannot form a structural cost advantage, subsidies will be difficult to sustain, and incumbent platforms’ scale, user habits, restaurant relationships, and dedicated delivery networks will remain barriers. If challengers’ investment remains high for a prolonged period, even without overturning the market structure, it may force incumbent platforms to increase promotions and depress industry margins.

Risks

• New entrants such as Rapido and Flipkart may adopt aggressive subsidies after obtaining sufficient funding, causing pressure on order growth and margins.
• Low-commission models may fail to cover fulfillment costs, and industry competition may evolve into sustained losses.
• Peak hours, equipment, and service requirements for shared ride-hailing riders and food delivery riders may not match, potentially damaging customer experience.
• Goods and services tax on delivery fees or antitrust regulatory measures targeting food delivery platforms.
• Quick commerce competitors’ expansion speed and operating efficiency may exceed expectations.
• Structural or seasonal disruptions may occur in the delivery rider ecosystem.
• Incumbent platforms may increase discounts and marketing investment to defend market share, causing long-term margin declines.

What to watch

• Whether Rapido can use existing two-wheeler ride-hailing capacity to lower per-order delivery costs while maintaining the food delivery experience.
• Flipkart’s actual commission rate, subsidy intensity, city coverage, and official launch timeline.
• Demand, order density, and fulfillment efficiency of low-ticket-size orders in non-core cities.
• User growth, repurchase rate, and unit economics performance of Swiggy’s Toing.
• Challengers’ funding scale, loss tolerance, and whether restaurants are willing to provide additional discounts.
• Changes in Zomato’s and Swiggy’s net order value growth, platform fees, per-order profit, and market share.
• If a new cost model is validated, whether incumbent platforms can replicate it quickly.