The deterioration in margin outlook stems from a notable intensification in competitive pressure that has persisted since September 2025 and continues into January 2026. UBS’s pricing tracker shows discounts have widened by 200-300 basis points compared to September levels and have further increased in January 2026 versus 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, though still elevated compared to earlier periods. This competitive dynamic reflects the intense battle for market share in India’s quick commerce space, where customer acquisition through aggressive pricing has become a standard strategy.
Margin Recovery Timeline Extended
The most significant impact of UBS’s downward revision is the pushback in when the sector achieves sustainable margin improvement. For Eternal’s Blinkit division, UBS forecasts the quick commerce unit to reach breakeven in FY27 (versus FY26 previously), a critical inflection point that has now been delayed by a fiscal year. Similarly, for Swiggy’s Instamart, margin trajectory has deteriorated substantially, with adjusted EBITDA margins down 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, the sector’s profitability improvement remains elusive in the near term.
UBS’s analysis notes that while newer platform entries and category expansion are providing “a still solid multi-year growth runway,” the immediate margin profile has deteriorated meaningfully.
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, price targets were lowered: Eternal’s target was revised to Rs375 (from Rs400 previously) while Swiggy’s was cut to Rs510 (from Rs580 previously).
The price target reductions are particularly notable for Swiggy, which faced a steeper markdown of Rs70 per share. UBS’s analysis suggests that “recent correction, coupled 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 opportunity for long-term investors.Despite the EBITDA headwinds, UBS’s valuation methodology suggests the stocks may 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 forward EBITDA (discounted back by a year). Swiggy’s quick commerce unit (Instamart) was repriced to 0.8x 1-year forward GMV (versus 6x 1-year sales previously), suggesting a more conservative stance on near-term profitability achievement.