Q4 preview: Will quick commerce lead new-age internet growth in the March quarter?

The March quarter earnings season will be pivotal for new-age tech companies, particularly quick commerce players like Zomato and Swiggy, as market corrections have made the internet space more appealing. It would be interesting to see if quick commerce players can sustain their growth amidst competitive pressures and store expansions impacting their margins.

While food delivery growth is expected to moderate, aggressive dark store expansion would drive healthy growth in quick commerce (QC), analysts at JM Financial said in a latest report. The report highlights that food delivery margins are expected to expand, high competitive intensity and store expansion is likely to impact QC margins. Both Zomato and Swiggy have been focusing on improving their food delivery margins.

The domestic brokerage house expects Zomato’s consolidated operating profit, or earnings before interest, taxes, depreciation, and amortisation (EBITDA) to decline to ₹60 crore in Q4 FY25, against ₹160 crore in Q3 FY25. The profit after tax (PAT) is likely to decline to ₹0.7 crore versus ₹59 crore in Q3 due to higher losses in quick-commerce subsidiary, Blinkit. For the food delivery business, the agency forecasts 2% QoQ drop in its gross order value (GOV), while it is seen growing 14.7% YoY.

“The sequential drop may be due to seasonality (fewer days in February), whereas YoY should be slower than recent quarters on account of broader consumption slowdown,” JM Financial said in its report.

In case of Swiggy, the brokerage expects consolidated EBITDA and PAT to be at loss of ₹856 crore and ₹927 crore, respectively, versus loss of ₹726 crore and ₹803 crore in Q3 FY25. For Swiggy Instamart, sequential GOV growth of 25% is expected, led by robust increase of 31% in order volumes. The food delivery segment is forecasted to report sequential GOV decline of 2%, and YoY growth of 17%, amid seasonality factor and broader consumption slowdown.

Meanwhile, Nykaa (FSN E-Commerce Ventures Ltd.), a prominent Indian e-commerce company specialising in beauty, wellness, and fashion products, is anticipated to deliver 24% and -9% YoY and QoQ growth in revenue, respectively. Core beauty and personal care (BPC) gross margin is expected to improve 120bps YoY to reach 42.7% due to rising owned brands salience and lower discounting. Contribution margin in core BPC is, however, expected to decline by 80bps YoY due to due to increased marketing spends and marginally higher fulfilment expense per order.

On the other hand, Paytm is expected to report flattish growth due to seasonally weak March quarter. The fintech major’s better operating leverage due to lower employee cost will lead Paytm turning adjusted EBITDA positive, excluding UPI incentives. The brokerage expects the company to turn PAT positive in Q4 with a net profit of ₹4.5 crore. “Any updates on the three regulatory triggers and increasing customer acquisition would be keenly watched,” it added. 

For Delhivery, India's largest fully integrated logistics services provider, JM Financial expects subdued growth of 1.7% YoY (-13.1% QoQ) in shipments in Express Parcel segment (EPS) due to overall consumption softness along with rising QC and Meesho’s in-housing (65% of volume mix as of Q4). On a consolidated basis, Delhivery is likely to see YoY revenue rise of 9.4% with gross margin improving 50bps QoQ benefitting from optimised line haul costs. Further, adjusted EBITDA margin is epxcetd to decline by 70bps sequentially (+20bps YoY) to reach 1.2%.

“We, however, expect the company’s recently announced acquisition of Ecom Express to be a significantly positive trigger as it will enable Delhivery to gain incremental scale while transitioning Ecom Express’ volumes to its lower cost network,” the report noted.

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