Brokerage Maintains ‘Buy’ Ratings on Both Food Delivery Platforms Despite Rising Cost Pressures

Rising fuel prices may create short-term pressure on India’s food delivery and quick commerce sector, but analysts at Elara Capital believe Eternal is better equipped than Swiggy to absorb the impact and protect profitability.

The brokerage has reaffirmed its “Buy” ratings on both companies while highlighting Eternal’s stronger pricing power, premium customer base, and better operating leverage as key advantages in managing rising delivery-related costs.

Elara Capital has assigned a target price of ₹400 for Eternal and ₹360 for Swiggy, maintaining a positive long-term outlook on India’s rapidly growing food delivery and quick commerce industry.

Fuel Price Hike Raises Cost Concerns for Delivery Platforms

The recent increase in petrol and diesel prices has triggered concerns across sectors dependent on logistics and last-mile delivery operations. Analysts noted that delivery economics could come under pressure if fuel inflation continues over the coming quarters.

Food delivery and quick commerce companies rely heavily on gig workers and large delivery fleets, making fuel prices an important component of operational expenses.

According to Elara Capital, a ₹4 per litre rise in fuel prices translates into roughly a 4 percent increase in petrol and diesel costs, creating incremental pressure on delivery partner payouts and platform margins.

The brokerage estimates that on an annual basis, Eternal and Swiggy together are expected to process billions of orders across food delivery and instant commerce platforms, making even small increases in delivery costs financially significant over time.

Why Eternal Is Seen as Better Positioned

Analysts believe Eternal has multiple structural advantages that could help it manage fuel-led inflation more effectively than Swiggy.

Premium Customer Base

Elara Capital noted that Eternal caters to a relatively more premium and less price-sensitive customer segment. This gives the company greater flexibility to pass on rising costs through:

• Platform fees
• Delivery charges
• Handling fees
• Dynamic pricing strategies

Analysts believe customers on the platform may be more willing to absorb moderate price increases without significantly impacting order volumes.

Stronger Profitability Cushion

Another major advantage highlighted by the brokerage is Eternal’s stronger profitability profile and larger advertising revenue base.

Higher advertising income and better operating leverage provide the company with additional financial cushioning against rising delivery expenses.

Swiggy, on the other hand, is still working toward achieving stable profitability in its quick commerce business, making it relatively more vulnerable to margin pressure.

Larger Scale Advantage

Eternal’s larger scale in both food delivery and quick commerce operations also improves cost absorption capabilities. Greater order density and operational efficiencies may help offset part of the fuel-related cost increase.

Analysts believe scale advantages become increasingly important during periods of inflation and rising logistics expenses.

Per-Order Impact Remains Manageable for Now

Elara Capital estimates blended delivery costs at approximately:

• ₹45 per order for Eternal
• ₹55 per order for Swiggy

Fuel expenses are estimated to account for nearly 20 percent of delivery costs.

Based on current fuel price hikes, the brokerage estimates a direct impact of roughly ₹0.44 per order. While this may appear limited in isolation, the impact could increase significantly if fuel prices continue rising over the next few months.

In a scenario where fuel prices rise by ₹10 per litre, the per-order impact could increase to approximately ₹1–1.2 per order.

However, analysts believe the burden is likely to be distributed across:

• Customers
• Platforms
• Delivery partners

This reduces the probability of a major immediate earnings shock for either company.

EV Adoption Helps Reduce Risk

One important factor limiting the overall impact is the increasing adoption of electric vehicles and bicycles among delivery fleets.

Elara noted that EV and cycle penetration across delivery operations helps reduce dependence on petrol and diesel costs, especially in quick commerce deliveries concentrated within shorter distances.

This trend is expected to improve operational efficiency over the long term and partially shield platforms from future fuel price volatility.

Swiggy Faces Higher Margin Pressure

While Elara remains positive on Swiggy’s long-term growth prospects, analysts believe the company could face relatively higher earnings pressure due to:

• Lower profitability cushion
• Higher quick commerce investments
• Ongoing contribution margin improvement efforts
• More price-sensitive customer base

The brokerage estimates that in a high fuel inflation scenario, Swiggy’s EBITDA impact could be materially larger compared to Eternal.

However, analysts still remain constructive on the company’s long-term opportunity in India’s fast-growing convenience commerce market.

Bigger Risk Lies in Consumer Spending Slowdown

Beyond direct fuel costs, Elara cautioned that the larger long-term risk may come from the second-order impact on consumer spending patterns.

Higher fuel prices could potentially reduce discretionary spending, affecting:

• Food delivery order frequency
• Impulse quick commerce purchases
• Restaurant advertising budgets
• Marketing spends by D2C brands

Analysts believe sustained inflationary pressure may eventually impact the broader consumption ecosystem, which remains a key revenue driver for digital commerce platforms.

Quick Commerce Industry Continues Rapid Expansion

Despite near-term cost pressures, India’s quick commerce and food delivery market continues to witness strong structural growth driven by:

• Urbanisation
• Rising smartphone penetration
• Convenience-driven consumption
• Expanding digital payments ecosystem
• Growing demand for instant delivery services

Industry experts believe leading platforms with stronger operational efficiency, pricing power, and diversified revenue streams are likely to emerge as long-term winners in the sector.

Outlook Remains Positive for Sector Leaders

Brokerages remain optimistic on long-term growth prospects for both Eternal and Swiggy despite near-term inflationary challenges.

Analysts believe companies capable of balancing:

• Scale growth
• Margin expansion
• Customer retention
• Delivery economics
• Advertising monetisation

will be better positioned to benefit from India’s rapidly evolving digital commerce ecosystem.

For now, Elara Capital believes Eternal holds a relative advantage due to its stronger financial positioning and better ability to absorb rising fuel-related costs.