India food delivery: New food-delivery entrants could pressure growth, but Bernstein sees limited evidence of a sustainable cost-model disruption.

Overview

Bernstein examines whether new entrants such as Rapido and Flipkart can expand India's food-delivery market or structurally erode the incumbents' economics. It concludes that the sector is attractive and underpenetrated, but a lasting challenger advantage would require difficult-to-achieve changes to delivery and operating costs.

Core views

Bernstein starts from an industry that appears attractive to disrupt: Eternal (Zomato) and Swiggy have operated as a stable two-player market, food-delivery growth is running at 18–20% year on year, direct-cost increases can be passed to customers through platform fees, adjusted EBITDA margins are about 5%, and the model is asset-light with a negative working-capital cycle. The two companies invested roughly US$4–5 billion in food delivery before their IPOs, yet their combined food-delivery valuation is about US$20 billion, implying an approximate 4–5x Tobin's Q versus that replacement-cost estimate. Bernstein argues that this apparent value creation can attract entrants. At the same time, the report sees substantial room for market expansion. Food delivery represents only 15%+ of India's food-services market; annual transacting customers across Eternal and Swiggy total about 85–95 million, while monthly transacting customers are 27.2 million for Zomato and 19.2 million for Swiggy. Food-delivery net AOV is around INR 400 versus roughly INR 150 for the broader food-services market. Bernstein says this lower-AOV opportunity appears to be the focus of Rapido's reported no- or low-commission pilot, while media reports indicate Flipkart may pursue a 10–11% commission structure. Geographic expansion is another route: the top 20 cities account for 30–40% of organized food service, and major QSR chains have concentrated their networks in the top 50 cities; digitally enabling lower-AOV delivery outside the largest cities could help organize that market. The central analytical question is whether a new model can achieve sustainable unit economics. For Zomato in 1Q27, delivery costs are about INR 60–65 per order, other direct costs INR 25–30, indirect costs about INR 18, and adjusted EBITDA INR 23 per order. Delivery riders optimize earnings per hour or day, so a challenger cannot readily lower rider pay without increasing deliveries per rider. Rapido's potential advantage is greater utilization of its two-wheeler ride-hailing fleet, but Bernstein flags practical constraints: food delivery is highly peaked, with more than 70% of demand in weekday evenings and weekends; rider and vehicle availability may not be interchangeable; and separate uniforms or food bags can add operational complexity. Poor service could also damage customer affinity. Bernstein considers other direct costs—discounts, payment charges, support and refunds—the hardest to reduce. It sees some possible efficiency in indirect costs such as advertising, technology, cloud and staffing, and allows that a platform may accept lower EBITDA per order to expand absolute EBITDA. Even at the outer end of its assumptions, however, the report estimates INR 15–20 of delivery savings plus lower indirect costs and INR 7–8 of EBITDA sacrifice could free only INR 20–30 per order for customers and restaurants. That amount is not currently enough, in Bernstein's view, to shift customers materially from the incumbents without loss-funded incentives. New entrants may also lack the incremental restaurant-funded discounts that supported Zomato and Swiggy while they built user habits. If a structural cost solution emerges, Bernstein believes incumbents could likely recognize and replicate it; Swiggy's Toing is described as an effort to test ecosystem behavior and unit economics under a new model. Until then, the scale of disruption depends largely on challenger funding. Aggressive competition could pressure Bernstein's near-term NOV growth estimates for Eternal of 20% in FY27 and 18% in FY28, and for Swiggy of 17.6% and 17.4%, respectively. Over the longer run, high investment without a clear sustainable cost answer could pressure incumbent margins. Bernstein nevertheless retains Outperform ratings on both Eternal and Swiggy.

Analysis framework

Bernstein assesses the competitive threat by combining market-penetration and AOV analysis with a per-order cost breakdown for Zomato. It then tests whether shared rider fleets, lower commissions, operating efficiencies and lower margins could create enough economic room to change customer or restaurant behavior, before considering the likely incumbent response.

Methodology notes

• Industry AnalysisSupply-demand framework

  Food-delivery market penetration and expansion analysis

  The report compares food delivery's share of India's food-services market, customer counts, order values and city concentration to identify potential demand expansion.

• Industry AnalysisVolume-price decomposition

  Per-order unit-economics analysis

  Bernstein separates delivery, other direct, indirect and EBITDA per order to estimate how much cost saving could be passed to customers or restaurants.

• Valuation methodsSOTP (Sum-of-the-Parts) Valuation

  Multiple-based sum-of-the-parts valuation

  The report values Eternal and Swiggy by applying separate multiples to food delivery, quick commerce and other businesses to derive target prices.

Asset mapping & comparison

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

• Eternal (ETERNAL.IN)

  Covered incumbent in India's food-delivery duopoly; potential beneficiary of market expansion but exposed to challenger-funded growth pressure.

  Strengths

  Established customer and restaurant habits, profitable food-delivery economics and ability to replicate a proven structural cost innovation.

  Weaknesses

  Its growth outlook could be pressured by aggressive new entrants and incentives.

  Comparison

  Bernstein estimates FY27/FY28 NOV growth of 20%/18%, versus 17.6%/17.4% for Swiggy.

  Risks

  Regulatory change, quick-commerce competition and delivery-rider ecosystem disruption.

• Swiggy (SWIGGY.IN)

  Covered incumbent in India's food-delivery duopoly; testing alternative economics through Toing.

  Strengths

  Established scale and the ability to test a new business model through Toing.

  Weaknesses

  Potential growth and margin pressure if challengers deploy significant funding.

  Comparison

  Bernstein estimates FY27/FY28 NOV growth of 17.6%/17.4%, versus 20%/18% for Eternal.

  Risks

  Regulatory change, quick-commerce competition and delivery-rider ecosystem disruption.

Key data

• Food-delivery growth18–20% YoYCurrent sector growth cited by Bernstein.
• Food delivery share of food services15%+Indicates the sector still serves a limited share of India's food-services market.
• Monthly transacting customers27.2 million for Zomato; 19.2 million for SwiggyCurrent monthly customer bases cited in the report.
• Net AOV~INR 400 for food delivery; ~INR 150 for food servicesSupports the lower-AOV market-expansion opportunity.
• Zomato 1Q27 per-order economics~INR 60–65 delivery; INR 25–30 other direct costs; ~INR 18 indirect costs; INR 23 adjusted EBITDAThe cost base used to test challenger economics.
• Potential structural economic releaseINR 20–30 per orderBernstein's outer-range estimate of savings and lower EBITDA available for customers and restaurants.
• Eternal target priceINR 350 per shareDerived from a multiple-based SOTP.
• Swiggy target priceINR 430 per shareDerived from a multiple-based SOTP.

Impact & implications

The report argues that low-commission entry may broaden food delivery, especially at lower order values and beyond major cities, but it is not yet a proven structural threat to incumbent economics. Near-term growth could weaken if challengers spend heavily, while a durable margin threat would require a demonstrably better cost structure.

Risks

• Regulatory risks, including GST on delivery charges and potential concerns around anticompetitive charges in food delivery.
• Competition in quick commerce could ramp faster and more effectively than expected.
• Structural or seasonal disruptions could affect the delivery-rider ecosystem.

What to watch

• Whether Rapido can use its ride-hailing fleet while maintaining rider availability and food-delivery customer experience.
• Whether lower-commission or low-commission models can produce sustainable unit economics rather than loss-funded discounts.
• The aggressiveness and funding capacity of new challengers, which could affect near-term growth for Eternal and Swiggy.
• Results from Swiggy's Toing experiment on ecosystem behavior and unit economics.