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Quick commerce is emerging as a rare bright spot within the broader consumption space, growing at a breakneck pace, according to Gautam Duggad, Head of Research, Institutional Equities at Motilal Oswal Financial Services.
While overall consumption has slowed, this segment has achieved phenomenal scale post-COVID, with industry growth projected at a 20% compound annual growth rate (CAGR) over the next decade, he noted.
“Of course, today, 20% for the segment may look less because they are growing at 40-50%, but if you stretch that over a 10-year period, at a top line basis for the industry as a whole put together, 20% is a very good number," he said adding that it makes sense to bet on two or three names in the space.
Motilal Oswal has been holding Zomato in its model portfolio since it was at ₹50 per share and remains positive on it.
Earlier today, quick commerce platform Zepto announced a fundraising of $350 million in its third funding round of 2024, led by Motilal Oswal Private Wealth.
Also Read: IPO-bound Zepto raises $350 million
The round included investments from notable players like Motilal Oswal AMC, Raamdeo Agarwal, and family offices of brands such as Mankind Pharma, Haldiram Snacks, and RP Sanjiv Goenka Group. Celebrity investors Sachin Tendulkar and Abhishek Bachchan also participated.
With its valuation holding steady at $5 billion, the IPO-bound Zepto has now raised over $1 billion this year, marking a strong funding trajectory for 2024.
Among other sectors, capital goods, he says, has emerged as one of the few sectors to exceed revenue expectations in the July-September quarter. He prefers it over cement within the industrials theme.
"We saw earnings growth of 17% against expectations of 10-11%, with a strong 20% topline and EBITDA growth," he noted.
Motilal Oswal has also recently doubled its weight in the IT sector to 15%, shifting it from underweight to overweight.
Also Read: Is competition heating up in quick commerce?
Within the IT space, Duggad prefers mid-cap players such as Persistent Systems and L&T Technology Services for their growth potential.
He also noted that private banks were recently upgraded to overweight in their model portfolio, driven by improving fundamentals in the non-lending financial space.
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