Nuvama Institutional Equities said Swiggy's Q2 revenue of Rs 3,601.45 crore beat the consensus estimate of Rs 3,540 crore while its reported losses at Rs 630 crore were in line with an estimate of Rs 640 crore.
Swiggy’s gross order value (GOV) growth in Food Delivery (FD) and Quick Commerce (QC) segments were lower than Zomato’s for H1FY25, indicating further market share loss during the last six months, Nuvama said.
But it noted that Swiggy Ltd has plans to more than double its active dark store area to 4 million square feet (msf) by March 2025 against 1.5 msf in March 2024 by doubling the store count and increasing the store size.
This strategic expansion is aimed at strengthening Swiggy’s market presence and meeting burgeoning consumer demand, it said.
Nuvama said Swiggy's sales growth was driven by the quick commerce segment. Food delivery GOV stood at Rs 7,190 crore (up 14.6 per cent YoY) while adjusted revenue increased 17.8 per cent YoY.
"Average MTU grew 4.7 per cent QoQ to 1.47 crore. Contribution margin (as % of GOV) in Food delivery improved further to 6.6 per cent from 6.4 per cent in Q1FY25 (5.1 per cent in Q2FY24). Adjusted Ebitda margin improved further to 1.6 per cent against 0.8 per cent in Q1FY25 (-0.8 per cent in Q2FY24), driven by higher monetisation in advertising, reducing cost of delivery and operating leverage," it said.
Nuvama said Swiggy has successfully piloted the Bolt program, enabling 10-minute food delivery to customers. Bolt has already achieved 5 per cent of total orders with eight weeks of launch showing immense potential for a scale-up, it suggested.
In the quick commerce segment, there is huge potential but with intense competition. Nuvama said Instamart's GOV stood at Rs 3,380 crore, up 75.5 per cent YoY.
Adjusted revenue came in at Rs 510 crore, up 113.8 per cent YoY primarily led by average MTU growth of 48 per cent YoY to 6.2 million while average order value (AOV) increased 8 per cent YoY. Active dark stores increased to 609 stores from 557 stores in Q1FY25.
"Orders per dark store per day increased to 1,210 orders in Q2FY25 from 1,103 orders in Q1FY25. Instamart saw improvement in contribution margin (as % of GOV) to -1.9 per cent from -3.2 per cent in Q1FY25 (-6.5 per cent in Q2FY24) while adjusted Ebitda margin came in at -10.6 per cent against -11.7 per cen in Q1FY25 (-18.1 per cent in Q2FY24)," Nuvama said.
Out-of-home GOV came in at Rs 730 crore, up 46.5 per cent YoY). Contribution margin (as percentage of GOV) stood at 3.8 per cent against 3.5 per cent in Q1FY25 (2.2 per cent in Q2FY24).
The Swiggy management is targeting profitability by end-CY25
"In Quick Commerce, Swiggy guided for a breakeven of contribution margin by Q3FY26E (Oct-Dec 2025), and adjusted Ebitda breakeven by Q2FY27E (Jul-Sep 2026). At the consolidated Group level, it is targeting to achieve positive Adjusted EBITDA by Q3FY26E (Oct-Dec 2025). Swiggy is not rated," Nuvama said.