Swiggy September quarter result: Food Delivery print in-line; Instamart beats burn expectations. Maintain ADD

On the Q2 print, overall B2C GOV grew 47.6% YoY (12.7% QoQ) to reach INR 166.8bn (in-line). Food delivery (FD) GOV grew 18.8% YoY to INR 85.4bn (HSIE: INR 84.9bn), largely driven by MTU addition (+17%). The segment witnessed heightened competition in terms of lowered subscription fee and reduced minimum order values; impact partially offset by platform fee hikes. FD’s adj. EBITDAM improved QoQ by 44bps to 2.8%. Instamart’s NOV grew ~71% YoY to INR 48.9bn (HSIE: INR 50.3bn). The segment predominantly surprised on net AOV expansion (INR 485 vs HSIE’s INR 455), led by (1) improvement in user quality and retention rates, (2) the launch of its Quick India movement (QIM) sale. Better ad monetization, optimization of customer incentives, and increased capacity utilization aided profitability. QC adj. EBITDA losses narrowed QoQ to INR8.49bn (INR8.96bn in Q1; HSIE: INR8.95bn). Note: Instamart’s performance continues to lag that of Blinkit. QC NOV grew 16.8% QoQ vs. Blinkit’s 26.9%. Swiggy plans to raise up to INR100bn through the QIP route to bolster its cash reserves and strategic flexibility amid intensified competition. If successful it will sport a cash pile of ~INR170bn (vs. Eternal’s INR183bn); certainly alleviating current balance sheet woes. We largely maintain our FY27/28 adj. EBITDA estimates and our SOTP-based TP of INR450/sh (implying 4x Sep-27 EV/sales (includes 43x Sep-27 EV/EBITDA for FD; 0.9x Sep-27 NOV for Instamart – A 55% discount to Blinkit). ADD rating stays.

FD print largely in-line: Swiggy’s FD GOV grew 5.6% QoQ (18.8% YoY) to INR 85.4bn despite challenging consumption patterns and weather-related disruptions. MTUs grew by 5.7% QoQ (17.2% YoY) to 17.2mn (HSIE: 16.9mn). Adj. revenue grew 6% QoQ (up 22% YoY) to INR22bn (HSIE: INR 21.8bn). Take-rates improved by 10bps QoQ to 25.8% (HSIE: 25.7%), led by growth in advertising. CM remained flat QoQ at 7.3% (HSIE: 7.5%). Adj. EBITDAM expanded 44bps QoQ to 2.8% (HSIE: 2.7%) due to cost discipline. Adj. EBITDA grew 25% QoQ to INR 2.4bn (HSIE: INR 2.3bn). Q2 saw competitive intensity spike due to reduced subscription fees, lower minimum order values, and new pilot entrants. Management’s 5% adj. EBITDAM guidance in the medium term stays.

Instamart optimizing growth through Maxxsaver: Instamart’s GOV grew 24.2% QoQ to INR 70.2bn (HSIE: INR 69.6bn). MTU grew 8.2% QoQ to 12mn (HSIE: 11.9mn), while order growth moderated to 9.1% QoQ to 101mn (HSIE: 110mn), courtesy a strategic focus on basket consolidation through the Maxxsaver program. Maxxsaver boosted net AOV, which grew 7.1% QoQ to INR 485 (HSIE: INR 455), supported by adoption of non-grocery categories, which now form about 26.2% of the sales mix, (vs 8.7% in Q2FY25). Dark store expansion continues to be measured in Q2 – 40 stores added (store count: 1,102; retail area: 4.6mn sq ft; avg. store size: 4,168 sq. ft). The company intends to prioritize densification and selection expansion in existing market and will focus on incremental city expansion once the current network matures. NOV growth (16.8%) lagged GOV growth (24.2%) QoQ due to rising non-grocery mix and Maxxsaver’s pricing impact. Adj. revenue grew 20.9% QoQ to INR10.4bn (in-line). Take rates grew 72bps QoQ to 21.2% of NOV (HSIE: 20.7%). Contribution margin improved by 251bps QoQ to -3.7% of NOV (HSIE: -4.9%), led by higher advertising, optimization of customer incentives, increased capacity utilization, and operating leverage. Management reaffirmed the guidance to reach CM breakeven by June-26. Adj. EBITDAM improved 404bps QoQ to -17.4% of NOV (HSIE: -17.8%). Adj. EBITDA losses narrowed QoQ to INR8.49bn (INR8.96bn in Q1; HSIE: INR8.95bn).

Valuation and outlook: While FD remains stable; QC continues to face stiff competition. The company’s planned fundraise aims to strengthen its cash reserve amidst competitive pressure. We largely maintain our FY27/28 adj. EBITDA estimates and our SOTP-based TP of INR450/sh (implying 4x Sep-27 EV/sales (includes 43x Sep-27 EV/EBITDA for FD; 0.9x Sep-27 NOV for Instamart – a 55% discount to Blinkit). ADD rating stays.

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Source: HDFC Securities Institutional Equities

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