Is Swiggy walking down Paytm’s path? A comparative look at India’s new-age IPOs

Paytm’s share price still lags its IPO level, reinforcing the belief that its IPO was significantly overpriced. That is not the case with Swiggy, but it is still grappling with profitability issues, dragging down its stock performance.

This raises a question: Is Swiggy following in Paytm’s footsteps in terms of share price performance? Let’s find out.

Paytm versus Swiggy versus Zomato

Paytm, Swiggy, and Zomato revolutionised the digital landscape. They have a similar business model – attract merchants and users on their platform and encourage them to transact more. Their operations hinge on providing “convenience” to all.

They earn revenue through merchant subscriptions, commission on transactions, and advertising by merchants, which converts to a contribution margin to cover fixed costs.

Notably, both Swiggy and Paytm employ a flywheel strategy: a business model built around consistent efforts that lead to self-sustaining growth. This requires strong customer loyalty and platform stickiness.

The flywheel approach

Both Paytm and Swiggy follow the one-app approach to cross-selling services. Swiggy’s app enables users to order food, groceries, and book tickets and tables for dining out. Similarly, Paytm offers a wide array of services within one app — from UPI transactions, wallet services, bill payments, loans, and more. In contrast, Zomato uses a multi-brand strategy where it has different apps for different services — Zomato, Blinkit, and District — making cross-selling difficult.

Zomato flywheel focuses on earning more from its existing delivery fleet. While Swiggy does the same, it additionally uses the flywheel to earn more from its loyal customer base. Swiggy spends more on customer engagement and retention, while Zomato spends more on customer acquisition and transition to a new app.

So far, Zomato’s approach seems to have been working as both Swiggy and Paytm, despite having the first-mover advantage and initial leadership in their respective markets, are posting losses.

Fig 1: 5-Year Profits of Paytm and Swiggy (FY 2020 – FY 2025)

Source: Screener.in

Is Swiggy walking on Paytm’s path?

Yes and No.

Yes, because Swiggy is following Paytm’s footsteps of innovating products on a single app and cross-selling them to its user base.

Over 30% of Swiggy users engage with multiple services, similar to Paytm’s high ARPU from multi-service users.

Flexible approach: Swiggy is experimenting with standalone apps for Instamart and Snacc, similar to Paytm’s approach, with a separate app for Paytm Money and Paytm for Business.

Innovation: Paytm is focusing its spend on technology and product innovation to serve its high-value consumers, instead of overspending on marketing to add low-value consumers.

Similarly, Swiggy is focusing on product innovation and organic growth in select cities with high spending power over marketing to acquire low-order value customers.

• Swiggy’s 10-minute food delivery service, Bolt, now accounts for 12% of its food delivery business and has shown 4-6% higher monthly retention than the platform average. Meanwhile, Zomato has shut down its 10-minute delivery services, Quick and Everyday, as it doesn’t see a return on investment.
• Swiggy has launched an invite-only membership programme, One BLCK, whose benefits span food delivery, dining out, and quick commerce offerings. This is something Zomato is avoiding with Zomato Gold, which only caters to food delivery and dining out.

Fig 2: YoY Growth Rate of Swiggy and Zomato’s GOV and Revenue

Source: Swiggy’s and Eternal’s Shareholder Letter

According to Swiggy’s Q4FY25 shareholder letter, food delivery is a relatively mature category that needs innovation to attract new consumers to sustain growth. Interestingly, Swiggy’s food delivery business growth outpaced Zomato in the last two quarters, though Zomato attributed its slow growth rate to the delisting of ~19,000 underperforming restaurants.

Why Swiggy is not Paytm

It did not overprice its IPO. Swiggy was valued at ~7.8x Price/Sales at IPO, compared to Zomato’s ~15x at the time, according to SBI Securities.

Swiggy delayed its IPO, allowing room for share price growth upon achieving profitability.

Current state of play

Swiggy is investing in growth (dark stores). In Q4 FY25, its operating expenses increased by 53%, and losses rose by 95% to Rs 1,081 crore. It added 316 net new dark stores, reaching its target of 4 million square feet, surpassing Zomato, which added 294 net new dark stores.

Swiggy plans to monitor the performance of these stores before expanding further. Its quick commerce segment lost Rs 5.6 in fixed cost on every Rs 100 order, due to network underutilisation (-Rs 1.7) from aggressive dark store additions and customer incentives (-Rs 2.5). However, the company believes that losses in Instamart have peaked and will now decline as dark stores mature.

Swiggy has already turned its Out of Home Consumption and Food Delivery business profitable. Any signs of profitability in quick commerce could drive its stock price higher. However, the company stated that competition could push the time required for quick commerce contribution margin to break even from 3 quarters (ending December 2025) to 3-5 quarters (ending June 2026).

Unlike Paytm, Swiggy doesn’t face regulatory compliance issues, increasing its chances of sustaining profitability once achieved.

What does FY26 have in store for Swiggy?

While intense competition will continue to stress margins as players compete for market share, order growth will likely continue. FY26 is the year of discretionary consumption as income tax cuts boost disposable income (especially in the Rs 12 lakh income bracket).

FY26 could see Swiggy and Paytm trimming losses and focusing on profitability, whereas Zomato will prioritse revenue growth over short-term profits.

Flywheeling towards opportunity?

Paytm adopted UPI, the decentralised free service that could have disrupted its payments business, and used it to attract users. Swiggy, however, did not do the same with the government’s free Open Network for Digital Commerce (ONDC). Can Swiggy take a leaf from Paytm’s strategy and adopt ONDC as a crowd puller? Can it turn ONDC competition into collaboration for mutual benefit? That is a thought left for the management to experiment with.

Investing case

In FY25, Swiggy’s revenue jumped 35% to Rs 15,226 crore, and net loss was Rs 3,116.7 crore. For the same period, Zomato’s revenue from operations saw a 67% jump to Rs 20,243 crore and a 50% growth in net profit to Rs 527 crore.

Growth rate and profits are skewed towards Zomato, which explains its higher price-to-sales (P/S) ratio of 11.1x than Swiggy’s 8.34x. Meanwhile, Paytm’s revenue fell 30.8% to Rs 6,900 crore in FY25, but its P/S ratio remained high at 7.86x as the platform showed strong sequential growth.

Fig 4: Year-to-date Share Price Momentum of Swiggy and One97 Communications              Source: Trading View

The stock prices of Swiggy and One97 Communications have corrected 43% and 13% year-to-date, respectively, as investors reacted to losses. The fourth quarter earnings created a mixed opinion among brokerages as ballooning losses in FY25 postponed profitability expectations beyond FY27.

Fig 5: Brokerage Price Target for Swiggy Updated after Q4FY25 Earnings

Source: Brokerage Reports

While foreign brokerages like HSBC, Jefferies, and Bank of America have slashed price targets for Swiggy over concerns of prolonged losses due to the cash burn and competitive pressure in quick commerce, domestic brokerages like JM Financial, ICICI Securities, and Motilal Oswal see sharp stock price corrections as an opportunity to buy the dip and hold for the long term. They expect losses to peak in the June 2025 quarter and begin to fall as average order value increases and improves unit economics.

Fig 6: Brokerage Price Target for Paytm Updated after Q4FY25 Earnings

Source: Brokerage Reports

The opposite was true for One97 Communications. Foreign brokerages, Jefferies and Bernstein, have a Buy rating on Paytm as they see profit after tax unfolding in FY26. However, domestic brokerage Motilal Oswal has a Neutral rating as it expects Paytm to turn EBITDA positive in FY27.

In conclusion

The next two years could be a turning point for both Paytm and Swiggy as they aim for profitability. The share price will continue to remain volatile in the short term, with sharp upside potential as profits come within reach.

It would be interesting to see how different implementations of the flywheel strategy fare for Zomato and Swiggy.

Note: We have relied on data from http://www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

Puja Tayal is a financial writer with over 17 years of experience in the field of fundamental research.

Disclosure: The writer and her dependents hold the stocks discussed in this article.

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