The future of food delivery and quick commerce in India looks promising, with the market projected to grow significantly. Quick commerce is expected to reach approx $9.95 billion by 2029, driven by urbanization and a demand for convenience. Consumers increasingly prefer especially young generation for instant delivery, for which the competitive landscape among platforms like Swiggy and Zomato are making inroads into the delivery space. Now with quick commerce, they are giving tough competition to traditional stores by leveraging technology to their advantage.
Stock Movement
With a market capitalization of Rs 92,862 crore, on Tuesday, the shares of Swiggy Ltd touched a day’s high of Rs. 430.85 which was 2.58 percent higher than the previous closing price of Rs. 420 apiece. This stock was recently listed on the bourses for a price of Rs. 420 which is 7.69 percent higher from the issue price of Rs. 390 apiece.
Brokrage Reccomdation:-
Trade Brains, a Research firm gave a ‘Sell’ rating on the stock with a target price of Rs 330 apiece, indicating a potential downside of 20.11 percent from Tuesday’s closing price of Rs. 413.10 per share.
Brokerage rational:-
As per the analyst report, The market share of Swiggy has constantly declined from 61.2 percent in 2018 and in FY24 it stood at 43 percent. They expect To compete against its peers, the company needs to bring out new offerings, improve operations, and invest heavily in advertising and sales promotions. These efforts could lead to higher operating costs and negative cash flows in the short term without immediate profitability.
Operational issues including a high employee attrition rate of 53.74 percent and logistical complexities, particularly in the quick commerce segment, are further straining profitability. Swiggy’s lower growth and contribution margins compared to competitors like Zomato raise concerns about its ability to scale effectively.
The company’s conservative expansion in Tier 2 and Tier 3 cities also impacts its growth potential. Cost Overrun for Dark store expansion is adding to the complexities relating to logistics, limited space, and intense competition potentially slowing expansion plans.
Financial performance:-
The company’s revenue surged 34.81 percent, increasing from Rs 2,390 crore in Q2FY24 to Rs 3,222 crore in Q2FY25. However, net losses in Q2FY24 were Rs. 564 crore in Q2FY24 which slightly increased to a loss of Rs. 611 crore in Q2FY25.
Revenue segmentation:-
As per FY24, Swiggy’s revenue consists of Food Delivery which contributes around 45.90 percent, and B2B contributes around 42.5 percent, platform contributes around 1.5 percent, Out of home contributes around 1.4 percent of the revenue, and the remaining 8.7 percent from Instamart.
Food Delivery business is nearing profitability in FY24 and it will be profitable in the June 2024 quarter. However, the other segments continue to be in losses but the it is a decreasing trend. Quick commerce is the highest contributor to the bottom-line losses.
Key Performance Indicators
The company has 557 dark stores as of Q1FY25, Food Delivery’s average order value stood at Rs. 436, Out of home consumption’s AOV was Rs. 3,236 and Quick Commerce’s AOV stood at Rs. 487 as of Q1FY25. Contribution margin as a percentage of gross order value for Food Delivery stood at 6.40 percent, Out-of-home consumption was 3.49 percent and Quick commerce was -3.18 percent as of Q1FY25.
Company profile:-
Swiggy Limited, founded in 2014, is a leading on-demand convenience platform in India that specializes in food delivery and grocery services. Their business model revolves around a user-friendly app that connects consumers with a vast network of restaurants and grocery stores.
Swiggy offers various services, including food delivery, grocery shopping through Instamart, and dining reservations via Dineout. They leverage advanced logistics and technology to ensure quick deliveries and improve customer experience. With a focus on expanding its market presence, Swiggy aims to innovate and improve continuously while meeting the evolving needs of urban consumers across India.
Written by Santhosh S
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