UBS cuts EBITDA estimates for Eternal and Swiggy for the next two to three years. This is why

UBS has cut adjusted EBITDA estimates for Eternal (Zomato) by 10-18% and for Swiggy by 12-28% for the next two to three fiscal years, citing increasing competition in India’s fast-trade sector slowing margin recovery. The analyst revisions pose a significant challenge for both platforms as they compete for market share in a segment characterized by increasingly aggressive discounting.The deterioration in margin prospects reflects a notable intensification of competitive pressure that has persisted since September 2025 and will continue into January 2026. The UBS price tracker shows that discounts increased by 200-300 basis points from September levels and increased further in January 2026 compared to November 2025.

Amazon and Zepto have emerged as the most aggressive discounters among online platforms, offering the highest promotional incentives, while Blinkit continues to maintain relatively lower discount levels, although still high compared to previous periods. These competitive dynamics reflect the fierce battle for market share in India’s high-speed commerce market, where acquiring customers through aggressive pricing has become a standard strategy.

Margin recovery timeline extended

The main impact of UBS’s downward revision is the pullback when the sector achieves sustainable margin improvement. For Eternal’s Blinkit division, UBS forecasts that the fast trading unit will reach breakeven in FY27 (vs. FY26 previously), a critical turning point that has now been postponed by a fiscal year. Similarly, the margin trajectory for Swiggy’s Instamart has deteriorated materially, with adjusted EBITDA margins declining by 120-130 basis points during FY27-FY30. The margin pressure reflects the reality that, despite continued network expansion and category expansion helping to grow the overall addressable market, improving industry profitability remains elusive in the near term.

UBS’s analysis shows that while newer platform entries and category expansion provide “a still solid multi-year growth trajectory,” the direct margin profile has deteriorated significantly.

Price target revisions: a mixed signal

Despite the downward EBITDA revisions, UBS maintained ‘Buy’ ratings on both stocks, reflecting confidence in their long-term positioning despite near-term margin headwinds. However, the price targets were lowered with Eternal’s target revised to Rs375 (from Rs400 earlier), while Swiggy’s was reduced to Rs510 (from Rs580 earlier).

The price target cuts are particularly notable for Swiggy, which faced a sharper downgrade of Rs70 per share. UBS’s analysis shows that “the recent correction, combined with a still very strong growth profile, keeps us positive on the sector”, indicating that current valuations may already be pricing in some margin pressure, creating potential opportunities for long-term investors. Despite the EBITDA headwinds, UBS’s valuation methodology suggests the shares can present value. Eternal is valued using a mix of DCF, SOTP (sum-of-the-parts) and multiple approaches, with Blinkit valued at 40x 2-year EBITDA (discounted back one year). Swiggy’s quick commerce unit (Instamart) was revised to 0.8x 1-year GMV (versus 6x 1-year revenue earlier), indicating a more conservative stance on achieving near-term profitability.