Swiggy’s June quarter result review: Race against time due to high cash burn

Our previous upgrade note on Swiggy (May-25) was primarily a bet on capturing some QC (quick commerce) value (available for free then). Since then (up 33%), most of the low-hanging fruits (in terms of returns) seem captured and hereon its essentially a race against time. Can Swiggy’s cash balance last the current burn rate (Cash: INR53.5bn, we estimate ~INR30-32bn burn over next four quarters). Sure, the Rapido stake (~12%) monetization could help; but its cutting it too close for us to be comfortable taking this bet. Hence, we downgrade Swiggy to ADD rating (earlier: Buy) with an SOTP-based TP of INR400/sh (unchanged); implying 4x Jun-27 EV/sales (includes 43x Jun-27 EV/EBITDA for FD; 1x Jun-27 NOV). On the Q1 print, overall B2C GOV grew 45.2% YoY (14.8% QoQ) to reach INR 147.9bn (in-line). Food delivery (FD) GOV grew 18.8% YoY to INR 80.9bn (HSIE: INR 80.5bn), driven by MTU addition. FD’s adj. EBITDAM declined QoQ by 51bps to 2.4%, due to seasonal factors such as elevated delivery partner incentives and annual appraisals in Q1. Instamart’s performance continues to lag that of Blinkit. QC NOV grew 18.2% QoQ vs. Blinkit’s 25%. QC adj. EBITDA losses widened QoQ to INR8.96bn (INR8.4bn in Q4; HSIE: INR8.89bn). Q1 net losses stood at INR 11.97bn (HSIE: INR 9.5bn).

FD (Food delivery) growth healthy, seasonality impacts margins: Swiggy’s FD GOV grew 10% QoQ (+18.8% YoY) to INR 80.9bn, led by strong MTU addition, which grew by 8% QoQ (16.2% YoY) to 16.3mn (HSIE: 15.8mn). Adj. revenue grew 11.4% QoQ (up 20.3% YoY) to INR20.8bn (HSIE: INR 20.6bn). Take-rates improved by 32bps YoY to 25.7% (HSIE: 25.6%). While contribution margin improved YoY (90bps), it declined QoQ by 47bps to 7.3% due to seasonal factors like elevated delivery partner incentives (typical of Q1) and annual appraisals. Adj. EBITDAM contracted 51bps QoQ to 2.4% (HSIE: 2.7%). Adj. EBITDA declined 9.5% QoQ to INR 1.92bn (HSIE: INR 2.15bn). Management reaffirmed its guidance of achieving 5% EBITDAM in the medium term.

Instamart prioritizing efficiency over expansion: Instamart’s GOV grew 21.1% QoQ (+108% YoY) to INR 56.5bn (HSIE: INR 58.3bn). MTU grew 12.8% QoQ to 11.1mn (HSIE: 10.8mn), while order growth moderated to 3.8% QoQ, primarily due to cart consolidation via Maxxsaver and company’s strategic decision of dropping low AOV orders. AOV grew by 16.1% QoQ to INR 612 (HSIE: INR 561), driven by rising non-grocery salience and basket-building (Maxxsaver). The dark store expansion in Q1 was measured – 41 stores added (store count: 1,062; retail area: 4.3mn sq ft; avg. store size: over 4,000 sq. ft). The management intends to optimize capacity and prioritize densification rather than aggressively expanding its footprint as it believes that the current footprint can support doubling of scale without major additions. Adj. revenue grew 17.1% QoQ (lower than GOV growth) as take-rates declined 51bps QoQ to 15.2% (HSIE: 15.8%) due to higher non-grocery mix and Maxxsaver launch. Contribution margin improved by 96bps QoQ to -4.6% (-5.6% in Q4FY25; HSIE: -4.9%). Management expects reaching CM break-even in QC between Dec-25 and June-26. Adj. EBITDAM improved 214bps QoQ to -15.8% (of GOV; HSIE: 15.2%). Adj. EBITDA losses widened QoQ to INR8.96bn (INR8.4bn in Q4; HSIE: INR8.89bn).

Valuation and outlook: While FD remains stable; execution gap in QC continues to widen vs Blinkit. Swiggy’s cash balance remains uncomfortably low relative to the expected burn for the next four quarters. Hence, we downgrade Swiggy to ADD (earlier: Buy) with an SOTP-based TP of INR400/sh (unchanged); implying 4x Jun-27 EV/sales (includes 43x Jun-27 EV/EBITDA for FD; 1x Jun-27 NOV).

Source: HDFC Securities Institutional Equities

Full report : https://www.hdfcsec.com/hsl.docs/Swiggy%20-%20Q1FY26%20-%20HSIE-202508010745090957333.pdf

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