Swiggy sees profitability a year away as fierce competition prompts infra investment

Sriharsha Majety, MD and Group CEO, Swiggy believes the company is still relatively in the early stages when it comes to its quick commerce penetration.

“As you can see in our Q2 results, we have seen some strong order volume growth…,” he noted in the post-earnings call. The company has an ambitious target of increasing its dark store count, doubling by the end of FY25 from 523 at the end of FY24. 

Moreover, with increased competition, there is stress on a few line items including marketing spends and pricing. “With increased competitive intensity, I think we may see some acceleration in overall category growth versus originally planned and that’s kind of why you see us going aggressively behind store expansion in the forecast,” explained Majety. 

At the consolidated group level, Swiggy expects to achieve positive adjusted EBITDA by October-December 2025, raising questions on the company’s ‘conservative’ timeline for profitability considering its core food delivery business is already profitable on an adjusted EBITDA level.

“We have been able to showcase an improved trajectory in our contribution margin profile for Instamart with better utilisation and cost reduction in the business, as well as increasing take rates. I think Harsha talked about some of the near-term competitive intensity we have seen. We are also significantly expanding our dark-store infrastructure network in the near term. All of that is factored in our overall guidance of CM (contribution margin) breakeven in another four quarters, or the December quarter of 2025,” explained Rahul Bothra, Chief Financial Officer at Swiggy. 

Swiggy, which listed on domestic bourses less than a month ago, did not share its internal metrics for market share, saying heightened competition from both existing and new players makes it harder to pin down market share numbers. 

Peers in the quick commerce space have been shifting their focus towards rearranging their captables, with domestic investors navigating FDI rules. While Zomato and Zepto have raised close to $1 billion, with their latest rounds being led solely by domestic inventors, Swiggy has been treading against the current with its focus on a marketplace model. 

“I think the business model (marketplace model for quick commerce) is well established. I think there is the opportunity to do an inventory-led model but we don’t believe the economics of it justifies for us to be able to invest in that business expansion. So, for now, the model is well established,” added Bothra in a post-earnings call with the analyst. 

Quick commerce 

Swiggy Instamart, the company’s quick commerce arm, saw its take-rate improving, driven by advertising revenues as FMCG giants start looking at quick commerce platforms for advertising bucks.

These take rates, a representation of the percentage of earnings per order, are further expected to increase as user spend increases and Swiggy notches a higher additional revenue from business enablement services for merchant partners. 

“We expect our steady-state take-rates and contribution margin to expand to 20-22% and 8-9% respectively, delivering a 4-5% adjusted EBITDA margin,” stated Swiggy in a shareholder letter.

“I think we are seeing increased take-up from the FMCG industry in this (advertising on Instamart) segment of the business. And overall, at a steady state, we expect it to be 6% to GOV,” noted Swiggy executive as Swiggy expects to double its dark store count to over 1,000 in the next four months.

“Today, there is a certain amount of subsidy that goes into the business, both through the subscription programme as well as getting users acquainted with this new service. Over time, there is an expectation that there will be a certain increase in the delivery fee,” explained Bothra. 

Swiggy currently expects the contribution breakeven for Instamart by the third quarter of the next financial year and an adjusted EBITDA breakeven by the September quarter of 2026. Its top seven cities are already contributing positively, with 75% of the stores in these cities hitting profits. 

Food delivery and Bolt 

Swiggy Bolt, which has now been scaled to 400 cities, dominated much of the conversation with analysts. Swiggy has been bullish on its 10-minute food delivery feature, Bolt, with the category already accounting for 5% of total food orders within two months of launch. 

With major restaurants and almost all cuisines on the service excluding pizzas, Bolt has been seeing strong traction, piquing investor interest in the sustainable economics behind it. 

“So, we are seeing Bolt’s AOVs (average order values) quite comparable to platform AOVs. And if they all work, there is a lot that still can happen on the front. So, this is not inherently a low AOV business,” said Rohit Kapoor, CEO of Food Marketplaces at Swiggy.

Swiggy’s core food delivery business clocked a profitable quarter driven by higher monetisation in advertising, reduction in delivery costs, and efficiencies from technology-led interventions. 

While Swiggy currently sees its food business as being exhaustive in terms of geographic expansion, it is now increasing its emphasis on existing cities where new colonies are coming up. Moreover, it is also focusing on unlocking new use cases for users with home-cooked meal delivery service Daily, corporate accounts, and Bolt. 

“So, one of two things could be that these (food delivery, quick commerce and dine out) sectors are more insulated from some of the slowdown discussion that is happening. Or within the food space itself, online delivery is slightly pacing ahead of overall food market growth,” noted Kapoor on the broader consumption slowdown. 

Swiggy also clarified it is not getting into the sports business in any significant way, rather it formed a subsidiary to acquire the rights of Team Mumbai in the World Pickleball League. Earlier today, Swiggy announced the incorporation of a new subsidiary with a share capital of Rs 1 lakh. 

Swiggy’s operating revenue increased to Rs 3,601.4 crore during the July-September 2024 quarter, up from Rs 2,763.3 crore earned. During the same period, it managed to rein in its losses to Rs 625.5 crore from Rs 657 crore in the previous year.