Intensifying competition in India’s online grocery delivery space is weighing on the shares of market leader Eternal Ltd. and its listed rival Swiggy Ltd.
Eternal’s shares dropped nearly 4% last week to their lowest level in three months on rising rivalry from Amazon.com Inc. and Flipkart India Pvt. Swiggy’s stock also declined for a fourth week as quick-commerce firms, which promise to deliver in 10 minutes, ramp up discounting.
The heated discount war is raising concerns that profitability for India’s delivery firms may remain under pressure after second-quarter earnings missed estimates and companies signaled focus on growth over margins.
That can potentially weigh on investor sentiment ahead of Swiggy’s planned follow-on share sale of over $1 billion and Zepto Pvt. Ltd.’s impending initial public offer to raise funds in their quest for market share.
“The quick commerce market is not infinitely expanding,” said Manu Rishi Guptha, a portfolio manager at MRG Capital. “For as long as there is cash to burn, it’s going to be a rapid race to the bottom.” When companies increase charges to turn profitable, reality will set in and growth will slow significantly, he said.
Swiggy’s Instamart and Zepto recently removed some charges and lowered minimum order values for free deliveries. Jefferies last week flagged more aggressive discounting across categories, with Amazon Now leading with the highest discounts, followed by DMart Ready, Swiggy’s Maxxsaver and Flipkart Minutes.
The price war mirrors a similar trend in China where Meituan, JD.com Inc. and Alibaba Group Holding Ltd. are rushing to offer deep discounts. Meituan, the industry leader, has lost almost a third of its market value this year after ceding market share to rivals.
(Reporting by Alex Gabriel Simon)
This report is auto-generated from Bloomberg news service. ThePrint holds no responsibility for its content.
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