Swiggy Ltd will focus on the sustainable growth of Instamart, chief executive Sriharsha Majety said in a shareholders’ letter on Friday, flagging the intensifying competition in India’s quick-commerce business.
The food delivery giant’s quick-commerce business reported a more than 53% jump year-on-year to ₹1,057 crore, while reducing losses by 4.5% to ₹736 crore.
“…theoretically one can grow significantly higher volumes in the short term in a large addressable market,” co-founder, managing director (MD) and group chief executive officer (CEO) Majety said in the letter. “However, the sustainability of that approach is questionable considering the high operating variable costs in the business…”
reported a marginal sequential decline in quick-commerce gross order value to ₹7,881 crore in the March quarter. Total orders grew to over 112 million, although the average order value dropped to ₹700 from ₹746 in the previous quarter.
The company sees a ₹1 trillion business opportunity in quick commerce in the ‘medium term’, the management told analysts in an earnings call.
“One thing we have reiterated again is that we will not take the route of buying growth. This is something we had committed to a couple of quarters ago, and we will continue to do so,” said in the analyst call.
“CM (contribution margin) breakeven is also a [source] of our staying power in this business. It is important to build a more durable business. We do not know yet how many players will be on the other side of all this spending and overall category. But what we have learnt from [the growth in sectors like] modern trade and telecom is that whoever got clarity early is standing today,” he added.
In the meantime, Instamart is focused on ‘differentiated’ offerings, such as its private-label Noice, which sells everything from eggs and bread to packaged snacks and sauces, as well as on experiments in cookware.
Majety told analysts to expect more such offerings at Instamart in the next three to four months, but did not offer specifics. Noice and other ‘differentiated’ offerings are CM positive.
Scepticism remains
Competition in the quick-commerce business has been heating up as deep-pocketed rivals, including Amazon, Flipkart, and Reliance Retail, invest more to expand. In April, Amazon said it would expand its quick-commerce arm Amazon Now to 100 cities, including Meerut, Panipat, Vizag, and Mysuru.
The company is also expanding its dark store network to 1,000 “micro-fulfilment centres”, as part of the tech giant’s ₹2,800 crore investment in the country.
This week, quick-commerce rival received approval for its initial public offering (IPO).
Yet, Swiggy is focusing on profitability over outspending the competition. This has made analysts tracking the stock sceptical.
“Instamart’s growth is expected to decelerate over the next few quarters on account of the lack of investments,” analysts at brokerage firm JM Financial wrote in a 7 April note, downgrading the stock to ‘Reduce’.
“This is because the company has chosen to focus on achieving its contribution margin guidance of breakeven by [first quarter of FY27] instead of defending its market share. This strategy is perplexing to us (as well as institutional investors, based on our recent interactions), particularly because competitive dynamics have only stiffened due to aggressive expansion being undertaken by traditional e-commerce players,” the note said.
Besides, the analysts said, they do not foresee it breaking even at the adjusted Ebitda level even in the next five years. “This makes us believe the business would continue to erode shareholder value in the foreseeable future. In this context, merger and acquisition with a larger player remains the only residual optionality for value realization, in our opinion.” Ebitda is short for earnings before interest, taxes, depreciation and amortization.
Food delivery soars
Amid all this, Swiggy reported a 15-quarter high in gross order value for its business at ₹9,005 crore in the fourth quarter, up 22.5% on-year. Revenue from food delivery operations rose over 27% to ₹2,073 crore during the quarter and 23% to ₹7,832 crore for the full fiscal year. The segment, Swiggy’s largest and most profitable business, posted a 39% rise in quarterly profit to ₹306 crore.
“We’ve been building on this speed, convenience, affordability equation for a bit,” Rohit Kapoor, CEO of the food marketplace at Swiggy, told Mint. “We have scaled up 99 Store, Bold, Eat Right—where we see an uptick in certain trends in healthy eating—and we have made this very sustainable in the last four to six quarters.
“Our understanding of what product fits what consumer segment has become much sharper. Our MTU [monthly transacting users] grew 21% this quarter. We continue to improve on all operating parameters. It is all coming together,” he added.
Overall, Swiggy reported a nearly 45% jump in revenue from operations to ₹6,383 crore for the quarter, while losses narrowed to ₹800 crore. For FY26, Swiggy’s revenue from operations grew more than 51% to ₹23,053 crore, but losses grew 33% to ₹4,154 crore.
Swiggy’s shares closed 1.18% higher on the stock exchanges, while the benchmark Nifty 50 remained flat.