LPG shortage, Swiggy, Eternal: 5% food delivery revenue hit so far, says ICICI Securities

LPG shortage, Eternal Ltd, Swiggy Ltd: ICICI Securities in a  fresh note on Friday said LPG shortage has had a limited impact on the food delivery (FD) space to date. Even as nearly 72 per cent of restaurants are dependent on LPG, restaurants in metros and more popular restaurants seem to be relatively insulated at this time, it said after conducting a survey of 220 restaurants across 40 major cities.

Till March 17, less than 5 per cent of overall FD revenue had been lost due to LPG shortage, it said while acknowledging that the situation remains fluid and it would try to assess the on-the-ground situation periodically.

Shares of Swiggy Ltd and Eternal Ltd have fallen 11-13 per cent in the past one month amid concerns FD revenues would be hit due to LPG shortage-linked operational issues at restaurants.

The domestic brokerage conducted a survey of 220 restaurants across 40 cities and towns pan India to understand the impact of LPG shortage on restaurants, as commercial LPG supplies are being diverted to domestic households.

"Nearly 55 per cent of overall restaurants and 60 per cent of popular restaurants (over 4.2 rating) in our survey indicated that they either have adequate alternative resources or more than a week’s inventory of LPG. Nearly 25 per cent of restaurants surveyed reported they were unable to service full demand (but are still servicing 80 per cent)," ICICI Securities said. 

On Friday, Eternal Ltd shares were trading 2.42 per cent higher at Rs 234.45. Swiggy Ltd was quoting 1.43 per cent higher at Rs 287.20.

"Only 24 per cent of restaurants reported that they have LPG stocks that will last less than a week. Interestingly, another 21 per cent of restaurants were hesitant to answer this question. The remaining 55 per cent of restaurants either reported that they have more than a week’s inventory or have a stable source of alternative fuels," ICICIS Securities said. 

ICICI Securities said operational adjustments are already visible. Restaurants are rationalising menus by reducing gas-intensive items and are prioritising dine-in over delivery to optimise kitchen throughput and implementing selective price hikes to offset higher input costs. 

"There is also a gradual shift towards alternative cooking solutions such as electric appliances and coal-based methods, although these come with trade-offs in efficiency, consistency and cooking time," it said.