Food Delivery Stocks Show Resilience Amid New Labour Regulations
Shares of India's leading food delivery platforms Zomato and Swiggy registered modest gains during Monday's trading session on November 24, as market analysts projected that the newly implemented labour codes would have only a marginal financial effect on both companies in the immediate future.
The positive market response comes after the Union government announced on Friday that four comprehensive labour codes would take immediate effect. These landmark reforms aim to streamline India's complex framework of 29 existing labour laws while formally defining crucial terms like 'gig workers', 'platform workers', and 'aggregators' for the first time in Indian legislation.
Financial Impact Assessment by Brokerages
According to JM Financial's detailed analysis, if the government mandates the maximum contribution rate of 2% of annual turnover, the effective cost for both Zomato and Swiggy would amount to approximately ₹2.1 to ₹2.5 per order across their food delivery and quick commerce operations. Projecting forward to fiscal year 2026, this translates to a substantial total contribution of roughly ₹4.3 billion for Zomato and ₹2.6 billion for Swiggy.
The brokerage firm anticipates that both companies will gradually transfer most of this additional financial burden to consumers, noting that a modest ₹2 to ₹3 increase per order is unlikely to significantly alter user behavior given recent acceptance of similar platform fees.
Morgan Stanley's assessment aligns with this outlook, estimating an added burden of approximately ₹1.5 to ₹2.5 per order. Their analysis suggests that the eventual EBITDA impact across platforms could range between 4-10%, though they expect most companies will successfully pass on a significant portion of these costs to customers, merchants, or delivery partners over time.
Varying Analyst Perspectives on Long-Term Effects
Bernstein offers a more optimistic view, projecting a milder impact of 25-70 basis points to EBITDA, with quick commerce operations facing greater exposure than traditional food delivery services. The firm highlights that both Swiggy and Zomato already maintain profitable or near-profitable order-level economics, and their existing insurance coverage could potentially offset part of the new regulatory requirements.
Elara Securities similarly estimates the incremental cost at ₹1 to ₹2 per order under the 1-2% turnover mandate. While acknowledging that short-term demand might soften if platforms increase fees, the firm emphasizes that both companies already provide worker insurance and are actively engaging with regulators, reducing the likelihood of substantial long-term margin erosion.
India's Expanding Gig Economy
The new labour codes arrive at a critical juncture in India's economic landscape, where the gig workforce has experienced exponential growth over the past decade. This expansion has been primarily driven by the proliferation of online commerce platforms and marketplaces including Zomato, Swiggy, Uber, Amazon, and Flipkart.
These temporary workers are typically employed through third-party staffing agencies. According to a Press Information Bureau release dated August 30, India's gig workforce is projected to surge dramatically from 10 million in 2024-25 to 23.5 million by 2029-30, underscoring the growing significance of this sector in the Indian economy.
The new regulations require aggregators such as Swiggy, Zomato, and other e-commerce and quick-commerce platforms to contribute 1-2% of their annual turnover toward social security benefits for gig and platform workers, with the contribution capped at 5% of the amount paid or payable to these workers.
