India's Quick Commerce Growth to Accelerate, Food Delivery to Remain Steady
Emkay report predicts rapid acceleration in India's quick commerce sector, while food delivery remains steady amid festive season competition.
India's rapid delivery landscape is poised for a significant shift, with the quick commerce sector expected to experience a surge in growth. According to a recent report by Emkay, the sector is witnessing a period of consolidation that will likely lead to much faster net order value (NOV) growth compared to previous periods.
Quick Commerce Set for Massive Acceleration
The report highlights that leading quick commerce platforms are on track to see their net order value growth accelerate significantly. Projections suggest that NOV growth could reach as much as 21.6 per cent quarter-on-quarter by Q2FY27. This surge is attributed to several shifting market dynamics, including higher minimum order values and a strategic reduction in discounts by certain platforms, which is driving consumer demand toward competitors.
Food Delivery Maintains Steady Momentum
While quick commerce prepares for a high-speed sprint, the food delivery segment is expected to follow a more consistent path. The report forecasts that food delivery platforms will maintain a steady momentum, with an expected year-on-year growth of approximately 18 per cent in order value. As the festive season approaches in the third quarter, competition between these major players is expected to intensify, though margins are projected to remain sustained.
Fintech Sector and the Impact of UPI Changes
The fintech landscape is also seeing significant movement. Emkay expects steady revenue growth and improving profitability for fintech companies by Q2FY27, driven by operating leverage. However, the timing of festive spending could impact year-on-year payment revenue growth, as spending patterns shift towards the third quarter.
A critical factor for the sector is the implementation of new Merchant Discount Rates (MDR) on UPI transactions, effective from October 15. Under the new framework established by the government and the National Payments Corporation of India (NPCI):
- A 0.4 per cent MDR will be levied on certain person-to-merchant (P2M) transactions exceeding Rs 2,000.
- For transactions of Rs 75,000 and above, the charge will be capped at Rs 300.
- Exemptions remain in place for person-to-person (P2P) transfers, merchant payments up to Rs 2,000, and transactions involving eligible small merchants under the zero-MDR framework.
Investment Outlook for Digital Platforms
Despite the varying growth trajectories and levels of business maturity, Emkay views India's digital platform companies as attractive investment opportunities. The report notes that these companies benefit from long-term growth potential and high operating leverage. However, it cautions investors that direct comparisons of earnings valuations across different platforms can be difficult, as each player operates with a unique growth profile and stage of profitability.