HDFC Securities Downgrades Swiggy To ‘Reduce’

SUMMARY

While key performance indicators for Swiggy are improving in food delivery and quick commerce segments, it still lags behind Zomato, said HDFC Securities

Swiggy’s quick commerce arm Instamart continues to underperform Blinkit in terms of both growth and unit economics, according to the brokerage

Swiggy widened its net loss sequentially by over 2% to INR 625 Cr in Q2 FY25, while its operating revenue rose 12% QoQ to INR 3,601.45 Cr

Brokerage firm HDFC Securities has downgraded Swiggy to ‘reduce’ from ‘add’ but bumped up its target price to INR 470 per share from INR 430 apiece earlier.

This would imply a downside of 9.2% from the stock’s previous close. Shares of Swiggy ended Wednesday’s trading session at INR 518.10 apiece on the BSE.

The stock continued its upward swing in Thursday’s intraday trading session and rallied over 11% to INR 576.95 on the BSE.

In a recent note, analysts at HDFC Securities emphasised that while key performance indicators for Swiggy are improving in food delivery and quick commerce segments, it still lags behind Zomato.

Swiggy reported a 4.8% quarter-on-quarter rise in monthly transacting users in the food delivery segment in Q2 FY25 while gross order value grew 5.6% QoQ to INR 7,190 Cr, the brokerage noted. This was largely thanks to the company’s aggressive push of its subscription programme Swiggy One.

However, HDFC Securities said that Swiggy still underperformed Zomato across KPIs in the food delivery segment in H1 FY25. While Swiggy reported a GOV growth of 14% in the food delivery segment in H1, Zomato’s GOV jumped 24%.

Further, Swiggy’s quick commerce arm Instamart continues to lag its Zomato counterpart Blinkit in terms of both growth and unit economics, according to the brokerage.

HDFC Securities underlined that while order density has been improving for Swiggy’s dark stores network, Blinkit, at a similar scale, has covered more ground in terms of unit economics.

“While step up in customer acquisition is encouraging, current market price now suggests that the path to convergence in quick commerce with Blinkit is a foregone conclusion,” the brokerage said.

HDFC Securities’ downgrade on Swiggy comes after the Sriharsha Majety-led company widened its net loss sequentially by over 2% to INR 625 Cr in Q2 FY25, while its operating revenue rose 12% QoQ to INR 3,601.45 Cr.

In its Q2 FY25 investor presentation, Swiggy said that it was eyeing an adjusted EBITDA profitability on a consolidated level by Q3 FY26.

The foodtech major is also establishing a new subsidiary which will operate in the “sports activities and amusement and recreation activities” segment.