Swiss investment bank UBS has issued a stark warning about India's booming quick commerce sector. According to their latest report, the growing intensity of discount wars is likely to delay margin recovery for companies operating in this space.
Discounts Expand Significantly
UBS's pricing tracker reveals concerning trends. Discounts have expanded by 200-300 basis points compared to September levels. The situation has worsened further in January 2026 relative to November 2025.
The bank's analysis examined multiple data points. They studied discounts on quick commerce platforms, conducted recent channel checks, and reviewed app download metrics from Sensor Tower. Their conclusion is clear: competition has intensified since September 2025 and remains fierce into January 2026.
Key Players in the Discount Battle
UBS identified the most aggressive discounters in the online marketplace. Amazon and Zepto have become the most fervent players, offering the most substantial promotional deals to attract customers.
Blinkit has taken a more measured approach. While keeping its discount levels comparatively lower than its rivals, they still remain higher than previous periods. This competitive landscape illustrates the fierce struggle for market share in India's quick commerce sector.
Target Price Revisions
The brokerage has made significant adjustments to its projections. UBS maintained a 'Buy' rating on Eternal but reduced its price target from ₹400 to ₹375 per share. For Swiggy, the bank also kept its 'Buy' rating while decreasing the target price from ₹580 to ₹510.
More importantly, UBS lowered its adjusted EBITDA projections for the next two to three years. The reductions range from 10-18% for Eternal and 12-28% for Swiggy. Despite these downward revisions, the bank maintains positive sentiment about the sector's long-term prospects.
Margin Recovery Timeline Extended
The recent adjustments have significantly affected the expected timeline for sustainable margin improvements. For Eternal's Blinkit division, UBS now predicts the quick commerce unit will achieve breakeven in FY27. This marks a crucial postponement of a full fiscal year from the previously anticipated FY26 timeline.
Swiggy's Instamart has experienced similar pressures. The platform has seen a notable decline in its margin trajectory. Adjusted EBITDA margins have dropped by 120-130 basis points during the period from FY27 to FY30.
Long-Term Optimism Amid Short-Term Challenges
Despite the current challenges, UBS remains optimistic about the sector's future. The brokerage notes that new platform introductions and ongoing category expansions are helping to broaden the total addressable market. This expansion provides a solid growth trajectory for the coming years.
The pressure on margins illustrates a market reality. While network and category expansions continue to enlarge the overall addressable market, sector profitability improvements remain elusive in the short term. Companies must navigate aggressive pricing strategies while building sustainable business models.
UBS believes the recent decline in stock prices, combined with a solid growth outlook, creates positive sentiment about the sector's long-term potential. However, investors should prepare for a longer wait before seeing meaningful margin recovery in this competitive space.
