Swiggy Rallies 8% Amid Broader Market Decline

Shares of Swiggy rallied over 8% in early trading hours today (November 27) to INR 499 apiece on the BSE despite a decline in the broader Indian markets.

The stock has gained over 12% since its listing on November 13 at INR 412.

While Swiggy shares are trading at discount of about 35-40% to archrival Zomato, brokerage firm UBS expects the gap to narrow as the Sriharsha Majety-led company is demonstrating stabilising market share, it said in its latest report.

Earlier this week, UBS initiated coverage on Swiggy with a ‘buy’ rating at a price target of INR 515 per share. This would imply an upside potential of over 11% from the stock’s previous close.

Analysts at UBS noted that Swiggy ceded market share to Zomato in the food delivery segment in 2023 after the Deepinder Goyal-led company successfully relaunched ‘Zomato Gold’. This helped Zomato increase order frequency from its top customers.

Further, Swiggy lagged behind Zomato in terms of growth in user base during the period. UBS attributed this to Zomato’s stronger presence and faster expansion in small towns, where the food delivery business took off after the COVID-19 pandemic.

However, there are early signs that Swiggy has addressed these issues, UBS said, adding that Swiggy’s volume growth was above Zomato’s between November 2022 and September 2023. 

Further, month-on-month trends in the past few months showed signs of convergence, the brokerage added.

The brokerage further said that Swiggy’s market share in the food delivery segment has stabilised in recent months and its volume growth between November 2023 and September 2024 were largely comparable to Zomato.

Further, Swiggy is neck and neck with Zomato across metrics such as restaurants, driver supply, among others, while its brand recall is comparable to Zomato.

UBS expects Swiggy’s food delivery GMV to grow 18% year-on-year in the financial year 2024-25 (FY25) against Zomato’s 23% YoY growth during the same period.

In the quick commerce segment, Swiggy Instamart lost market share to Blinkit and Zepto, but the former has made changes to its infrastructure with its dark stores becoming bigger and denser. Further, Swiggy Instamart also continues to have a strong brand recall in cities like Delhi where Blinkit has a greater presence.

Given Swiggy’s investments in the quick commerce segment over the past 12-18 months, UBS expects volume growth to recover in FY25 and AOV and margins to follow in FY26.

It is pertinent to note that Swiggy widened its consolidated net loss by over 8% to INR 611 Cr in the June quarter of the financial year 2024-25 (Q1 FY25) from INR 564.08 Cr in the year-ago period owing to a surge in operating costs.

However, Swiggy’s revenue from operations zoomed 35% to INR 3,222.2 Cr during the quarter under review from INR 2,389.8 Cr on the back of strong growth in its food delivery and quick commerce businesses.