The additional cost of social security funds for gig workers mandated by the country's new labour laws will likely be shared among the stakeholders, according to analysts. This will likely alleviate some pressure on the financials of platforms such as Eternal and Swiggy.
The central government last week implemented four labour codes — the Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020), and Occupational Safety, Health and Working Conditions (OSHWC) Code (2020) — to replace 29 labour laws.
The Code of Social Security mandates that aggregators have to contribute 1–2% of their annual turnover to a welfare fund for gig workers working with them. The contribution has been capped at 5% of payments to such workers.
This will impact companies such as food-delivery platforms Zomato and Swiggy; quick commerce apps Blinkit, Zepto and others; on-demand service companies, including Urban Company and Snabbit; ride-hailing apps Uber, Rapido and others; and ecommerce marketplaces such as Amazon India and Flipkart.
Food delivery and quick commerce platforms may face additional costs of Rs 1.5–2.5 per order on account of contributions to this welfare fund, estimates brokerage firm Morgan Stanley. Eternal and Swiggy may see their earnings before interest, taxation, depreciation and amortisation (Ebitda) reduce by 25–70 basis points, according to analysts at Bernstein. Those at Morgan Stanley have projected an Ebitda impact of 4–10%.
While short-term margin pressure is likely, the long-term profitability outlook for the two companies remains intact, noted Bernstein, adding that the companies may adjust prices to absorb the additional costs.
“At a consolidated level, Eternal and Swiggy would have to contribute Rs 430 crore and Rs 260 crore, respectively, towards the social security fund proposed by the government (basis FY26 estimates)... given that these aggregators are far from their own sustainable profitability guidance…(they) would eventually pass on the additional burden to their end customers rather than absorb the impact,” said JM Financial analysts, in a recent note.
Eternal and Swiggy already offer 1% of their revenue in insurance benefits for their workers, which can partially offset the additional costs.
Meanwhile, both companies have said in regulatory filings that the new labour codes are not likely to negatively impact their financials or businesses in the long term.
Shares recover
Eternal and Swiggy shares declined nearly 2% in early trade on Monday, before recovering. As of 1:45 pm, the counters were trading at Rs 303.85 and Rs 388.95, respectively, on the NSE. Newly listed Urban Company’s shares fared poorly, trading 3.5% lower at Rs 138.
The central government last week implemented four labour codes — the Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020), and Occupational Safety, Health and Working Conditions (OSHWC) Code (2020) — to replace 29 labour laws.
The Code of Social Security mandates that aggregators have to contribute 1–2% of their annual turnover to a welfare fund for gig workers working with them. The contribution has been capped at 5% of payments to such workers.
This will impact companies such as food-delivery platforms Zomato and Swiggy; quick commerce apps Blinkit, Zepto and others; on-demand service companies, including Urban Company and Snabbit; ride-hailing apps Uber, Rapido and others; and ecommerce marketplaces such as Amazon India and Flipkart.
Food delivery and quick commerce platforms may face additional costs of Rs 1.5–2.5 per order on account of contributions to this welfare fund, estimates brokerage firm Morgan Stanley. Eternal and Swiggy may see their earnings before interest, taxation, depreciation and amortisation (Ebitda) reduce by 25–70 basis points, according to analysts at Bernstein. Those at Morgan Stanley have projected an Ebitda impact of 4–10%.
While short-term margin pressure is likely, the long-term profitability outlook for the two companies remains intact, noted Bernstein, adding that the companies may adjust prices to absorb the additional costs.
“At a consolidated level, Eternal and Swiggy would have to contribute Rs 430 crore and Rs 260 crore, respectively, towards the social security fund proposed by the government (basis FY26 estimates)... given that these aggregators are far from their own sustainable profitability guidance…(they) would eventually pass on the additional burden to their end customers rather than absorb the impact,” said JM Financial analysts, in a recent note.
Eternal and Swiggy already offer 1% of their revenue in insurance benefits for their workers, which can partially offset the additional costs.
Meanwhile, both companies have said in regulatory filings that the new labour codes are not likely to negatively impact their financials or businesses in the long term.
Shares recover
Eternal and Swiggy shares declined nearly 2% in early trade on Monday, before recovering. As of 1:45 pm, the counters were trading at Rs 303.85 and Rs 388.95, respectively, on the NSE. Newly listed Urban Company’s shares fared poorly, trading 3.5% lower at Rs 138.