Synopsis: Swiggy's performance in the first half of FY25 revealed lower growth in its Food Delivery and Quick Commerce segments compared to Zomato, resulting in a potential market share loss. Despite reporting losses, Swiggy's revenue for Q2 exceeded expectations. The company is making aggressive expansions, particularly in quick commerce, and is focused on achieving profitability by the end of 2025.
Swiggy, one of India's leading food delivery platforms, has faced notable challenges in comparison to its competitor Zomato for the first half of FY25, particularly in terms of growth across its Food Delivery (FD) and Quick Commerce (QC) segments.
According to Nuvama Institutional Equities, Swiggy’s Gross Order Value (GOV) growth in both these segments was lower than that of Zomato, highlighting a potential market share loss in the last six months.
Despite this, Swiggy’s second-quarter revenue of Rs 3,601.45 crore surpassed analyst expectations of Rs 3,540 crore, though the company still reported losses of Rs 630 crore, in line with the anticipated Rs 640 crore loss.
Strategic Expansion Plans:
Swiggy’s management is focusing on expansion to recover and build upon its market share.
One of the most significant developments is the company’s plan to more than double its active dark store area from 1.5 million square feet (msf) in March 2024 to 4 msf by March 2025.
This will be achieved by increasing both the number and size of its stores, with the goal of strengthening its market presence and meeting the rising demand in the fast-growing quick commerce sector.
Performance in the Quick Commerce Segment:
The quick commerce segment has proven to be a driving force behind Swiggy’s revenue growth. Swiggy’s quick commerce division, which includes Instamart, showed remarkable growth in its GOV, which reached Rs 3,380 crore, reflecting a 75.5% year-on-year (YoY) increase.
Adjusted revenues from Instamart surged 113.8% YoY to Rs 510 crore, driven by a 48% increase in monthly transacting users (MTU), which reached 6.2 million.
Additionally, the average order value (AOV) grew by 8% YoY.
As part of its quick commerce expansion, Swiggy's Instamart division increased its active dark stores to 609, up from 557 in the first quarter of FY25.
Swiggy’s Bolt program, which offers 10-minute food deliveries, also gained traction, achieving 5% of total orders within just eight weeks of its launch.
This pilot program has shown immense potential for scaling up, which could further bolster Swiggy’s growth trajectory in food delivery and quick commerce.
Financials and Profitability Outlook:
Swiggy has made strides in improving its financial performance, especially in terms of margins.
The company’s Food Delivery GOV stood at Rs 7,190 crore, up 14.6% YoY, while adjusted revenues grew by 17.8%.
The contribution margin for food delivery improved to 6.6% from 6.4% in the previous quarter and 5.1% in Q2FY24.
Furthermore, Swiggy’s adjusted EBITDA margin improved to 1.6% from 0.8% in Q1FY25, marking a significant leap from the negative margins reported in Q2FY24.
Looking ahead, Swiggy is targeting profitability by the end of calendar year 2025.
The company has outlined a timeline for its quick commerce business to break even on contribution margin by Q3FY26 (October-December 2025) and on adjusted EBITDA by Q2FY27 (July-September 2026).
At the group level, Swiggy aims to achieve positive adjusted EBITDA by Q3FY26.
In conclusion, Swiggy's performance in H1FY25 has been a mixed bag, with the company showing strong growth in the quick commerce segment, but facing challenges in food delivery compared to its competitor Zomato.
