Swiggy, Eternal Surge After Zepto IPO Stalls: Competitors Poised for Mega Market Share Grab
Shares of rivals to the rapid-commerce giant Zepto Ltd. are set for a landmark month as the loss-making company's planned initial public offering faces a significant hurdle. Concerns over excessive cash burn have triggered investors to drastically lower the valuation, putting both Swiggy and Eternal in an accelerated growth phase.Competitors Benefit from Zepto Valuation Setback
Swiggy Ltd.'s shares surged nearly 24% in July, placing the company on track for its best month since listing in November 2024. Industry leader Eternal Ltd. is equally buoyant, having posted a 17% gain during the period, marking the strongest monthly advance in over two years.The IPO of Zepto encountered an initial setback when investors began doubting the high valuation previously pegged at $7 billion. Moneycontrol reported on Thursday that the company has put its public offering on hold and is now likely to raise a smaller amount from existing investors.
Pressure Mounting as Cash Burn Concerns Rise
The stalling of Zepto's IPO reflects mounting concerns over the firm's substantial cash burn rate. This pressure suggests that rivals could significantly gain market share in India's fastest-growing quick commerce sector.Zepto, which competes with Amazon.com Inc.'s India business and Tata Group's BigBasket, is backed by major investors including Nexus Venture Partners, Glade Brook Capital Partners, and StepStone Group. The scrutiny surrounding the IPO underscores the current competitive intensity in the Indian market.
Expert View: A Cash-Strapped Competitor Favours Swiggy
Rashi Talwar Bhatia, Chief Investment Officer at Ashmore Investment Management India LLP (which holds Swiggy shares), commented on the situation. She noted that a cash-strapped competitor will be most beneficial to Swiggy.Bhatia explained that she believes the company emerging as the second-largest player in this space is typically positioned to become the biggest beneficiary. This sentiment suggests aggressive market consolidation might be underway.
Swiggy Instamart Strategy Hinges on Long-Term Growth
Meanwhile, Nomura analysts provided insight into Swiggy’s Instamart strategy following its June-quarter results published Thursday. The report stated that while cash losses in the quick commerce segment will persist until at least the fiscal year ending March 2028, Instamart intends to trade margin for growth.Crucially, Nomura added that the company is positioned to fund these ongoing losses using the cash generated from its food delivery business operations.
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