Swiggy Reports Appetizing Q2, Revenues Up 11.7% at INR 36.1 billion Brokerage firm Motilal Oswal said in a post-earnings report that Swiggy's growth was faster than the category average set by Zomato over the medium term in the food delivery sector.

Food delivery startup Swiggy recently reported INR 36.1 billion in revenues in the second quarter of FY25, up by 11.7 per cent quarter-on-quarter (QoQ). The company's gross order value (GOV) also went up 14.6 per cent year-on-year (YoY), with the contribution margin standing at 6.6 per cent, denoting a slight expansion over the last quarter.

Swiggy's quick-commerce arm Instamart also saw its GOV grow to INR 33.8 billion, up 24.1 per cent QoQ, with the contribution margin negative at -1.9 per cent. Adjusted Earnings before interest, taxes, depreciation, and amortization (EBITDA) as a percentage of GOV was -10.6 per cent. Overall, Swiggy reported a net loss of INR 6.2 billion, down 4.7 per cent YoY.

Brokerage firm Motilal Oswal said in a post-earnings report that Swiggy's growth was faster than the category average set by Zomato over the medium term in the food delivery sector. "Swiggy's food delivery business is on a strong footing and is part of a stable duopoly. We believe GOV growth in India could be over 20 per cent in the near term, and a tug-of-war on market share should not meaningfully alter valuations for either of these businesses unless a meaningful change emerges in the growth outlook," said Motilal Oswal in a statement.

According to the report, Swiggy is also projecting sustainable adjusted EBITDA margins of 5 per cent for its food delivery business in the medium term. Motilal Oswal believes that this is "broadly achievable" as the unit economics are currently stable, notwithstanding the major capital push toward Bolt, the company's 10-minute food delivery service.

Motilal Oswal has termed Bolt as the "joker in the pack", as it achieved 5 per cent of total food delivery orders for Swiggy after being deployed across 400 locations. "Bolt could meaningfully impact food delivery volumes, we wait and watch how the average order values (AOVs) for this service pan out," said Motilal Oswal.

Sriharsha Majety, MD and Group CEO, Swiggy said, "The remarkable performance of our food business operations comes on the back of strong innovation and execution. We are constantly trying to anticipate and improve the consumer's experience. The recent launch of Bolt- our 10-minute delivery service is an example of that. Similarly, in quick commerce, we are anticipating and responding to consumer behavior to bring more and more convenience to urban households. Instamart today is present in 54 cities and delivers more than 32,000 unique items, within an average delivery time of 13 minutes."

However, the brokerage firm said in the report that it is slightly unsure about Swiggy's 'mega-hubs' strategy. Motilal Oswal believes that Swiggy's aggressive approach towards expanding its stock-keeping units (SKUs) by tripling the selection in its dark stores, and plans for 20,000 SKUs in larger stores raises concerns.

"The introduction of mega pods, with an extended capacity of over 50,000 SKUs, could potentially compromise the 10-minute delivery promise, a critical marker in competing against Blinkit and Zepto. Maintaining ultra-fast delivery times amidst such expansions will be a key challenge for Swiggy's Instamart," Motilal Oswal said in the report, stating that it is too early to decide a clear winner in the quick commerce sector.

"Swiggy, through its innovation DNA, has played a pivotal role in effectively inventing both food delivery and quick commerce, leading the way in these categories. However, it has seen a decline in its lead in food delivery and is currently trailing behind its key rival, Blinkit, in quick commerce – both in terms of GOV growth and profitability. While the Q-commerce race is only getting started, Swiggy's re-rating depends on accelerating GOV growth, increasing AOVs, and improving execution in the Q-commerce business," said Motilal Oswal in the report.