UBS cuts EBITDA estimates for Eternal, Swiggy for next 2-3 years. Here’s why

UBS cut adjusted EBITDA estimates for Eternal (Zomato) by 10-18% and Swiggy by 12-28% for the next two to three financial years, citing intense competition in India’s fast-paced commerce sector that is delaying margin recovery. The analyst correction marks a significant challenge for both platforms as they fight for market share in a segment characterized by increasingly aggressive discounting.

The deterioration in the margin outlook stems from significant intensification of competitive pressures that persisted from September 2025 and continued through January 2026. UBS’s pricing tracker shows that the discount widened by 200-300 basis points compared to September levels and increased further in November 2025 compared to January 2026.

Amazon and Zepto have emerged as the most aggressive discounters among online platforms, offering the highest promotional incentives while Blinkit continues to maintain relatively low discount levels, though still elevated compared to previous periods. This competitive dynamic reflects the intense battle for market share in India’s fast-paced commerce sector, where customer acquisition through aggressive pricing has become a standard strategy.

Extended margin recovery timeline

The most significant impact of UBS’s downward revision is when the sector achieves sustainable margin improvement. For Eternal’s Blinkit division, UBS forecasts a faster trading unit to reach breakeven in FY27 (versus FY26 earlier), a critical inflection point that has now been delayed until the financial year. Similarly, for Swiggy’s Instamart, the margin trajectory has deteriorated significantly, with adjusted EBITDA margins at 120-130 basis points during FY27-FY30.

Margin pressure reflects the reality that while continued network expansion and category expansion are helping to grow the overall addressable market, the segment’s profitability is unlikely to improve in the near term.

UBS’s analysis notes that while new platform entries and category expansion are “still providing a solid multi-year growth runway”, the immediate margin profile has deteriorated meaningfully.

Price target revisions: mixed signal

Despite the downward EBITDA revisions, UBS maintained a “buy” rating on both stocks, indicating confidence in their long-term positions despite near-term margin headwinds. However, the price targets were lowered: Eternal’s target was revised to Rs 375 (from Rs 400 earlier) while Swiggy’s was revised to Rs 510 (from Rs 580 earlier).

The price target cut is particularly notable for Swiggy, which faced a further markdown of Rs 70 per share. UBS’s analysis suggests that “the recent correction, with a still very strong growth profile, keeps us positive on the space,” 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 stocks may represent value. Eternal is valued with Blinkit at 40x 2-year forward EBITDA (discounted to one year) using DCF, SOTP (sum of parts) and multiple approaches. Swiggy’s fast commerce unit (Instamart) was valued at 0.8x 1-year forward GMV (versus 6x 1-year sales previously), indicating a more conservative stance on near-term profitability achievement.