While Raising PT to INR 470, HDFC Securities Downgrades Swiggy to “Reduce”

HDFC Securities, a broking firm, downgraded Swiggy from "add" to "reduce"; however, it raised its target price from INR 430 per share to INR 470. This would indicate a 9.2% decline from the stock's last closing price. Swiggy's stock closed on 4 December's trading session on the BSE at INR 518.10 per share. During 5 December's intraday trading session, the stock continued to rise, rising more than 11% to INR 576.95 on the BSE.

Although Swiggy's key performance indicators in the quick commerce and food delivery areas are improving, the company still trails Zomato, according to a recent report from analysts at HDFC Securities. According to the broking, Swiggy recorded a 4.8% quarterly increase in monthly transacting customers in the food delivery segment in Q2 FY25, while gross order value increased 5.6% on a quarter-over-quarter basis to INR 7,190 Cr. The company's vigorous promotion of its subscription service, Swiggy One, was primarily responsible for this.

Zomato is Still Leading the Race

According to HDFC Securities, Swiggy continued to lag behind Zomato in the food delivery sector across all KPIs in H1 FY25. In H1, Zomato's GOV increased by 24%, but Swiggy recorded a 14% growth in the food delivery market. Furthermore, the broking claims that Instamart, Swiggy's rapid commerce division, is still trailing its Zomato rival Blinkit in terms of growth and unit economics.

HDFC Securities emphasised that although Swiggy's dark shop network has seen an improvement in order density, Blinkit has made more progress in terms of unit economics at a comparable scale. The broking stated that although the increase in client acquisition is positive, the present market pricing indicates that the path to convergence in rapid commerce with Blinkit is inevitable.

Current Financial Structure of Swiggy

Swiggy was downgraded by HDFC Securities after the Sriharsha Majety-led company's operating revenue increased 12% QoQ to INR 3,601.45 Cr, but its net loss worsened sequentially by more than 2% to INR 625 Cr in Q2 FY25. Swiggy stated in its Q2 FY25 investor presentation that it aimed to achieve a consolidated adjusted EBITDA profitability by Q3 FY26. Additionally, a new subsidiary that will function in the "sports activities and amusement and recreation activities" section is being established by the foodtech company.

Even if the food delivery market is more established and less competitive, Swiggy's poor performance highlights the difficulties it faces, according to another broking business, HSBC Securities and Capital Markets (India). Swiggy was valued at $16 billion by HSBC, which included $1.3 billion in cash and investments, $10 billion for rapid commerce, and $5 billion for food delivery. Nevertheless, it does not anticipate that the overall business will achieve EBITDA breakeven before the fiscal year of 2028.

Swiggy’s Food Delivery Business Limits Expansion Plans

Swiggy’s food delivery business is focusing on enhancing operations in existing cities rather than expanding into new locations, prioritizing efficiency and growth.

StartupTalkyNitin Konde