Swiggy shares rose by over 6% following the announcement of improved financial performance for the second quarter of FY24. The company’s narrowing net losses and strategic advancements have positioned it as a promising player in India’s highly competitive online food delivery market.
The market’s positive reaction highlights Swiggy’s success in optimizing its cost structures and diversifying its revenue streams. Key initiatives, such as the acquisition of Dineout and targeted investments in emerging verticals, have strengthened its position in areas like restaurant reservations and quick grocery delivery. While Zomato remains a formidable competitor, with a larger market valuation and profitability milestones, Swiggy’s steady loss reduction and expanding user base underscore its resilience and potential for long-term success.
Financial Performance: Steady Improvement
Swiggy reported a 43% reduction in its net loss for FY24, which decreased to ₹2,350 crore from ₹4,179 crore in FY23. The company achieved a 36% growth in revenue, climbing to ₹11,247 crore, largely driven by a surge in its food delivery business and the rapid expansion of Instamart, its quick-commerce grocery delivery segment. The average order value (AOV) for food delivery stood at ₹428, while Instamart’s AOV reached ₹460, marking robust customer engagement.
Stock Market Reaction and Brokerage Insights
Swiggy shares surged by 6.2%, reaching ₹458 on the Bombay Stock Exchange (BSE), up from its previous close of ₹431.25. This rally pushed the company’s market capitalization beyond ₹1 lakh crore. Analysts at UBS initiated a “buy” rating, forecasting a 27% upside with a target price of ₹515. UBS emphasized Swiggy’s narrowing gap with competitor Zomato in terms of margins and scale, attributing the improvement to Swiggy’s cost controls and operational efficiency.
Key Business Drivers of Swiggy Shares
1. Quick Commerce Growth
Swiggy’s Instamart business has become a significant growth driver, contributing 23% of its gross order value (GOV), which totaled ₹35,000 crore in FY24. The segment’s revenue doubled to ₹1,100 crore, reflecting the increasing demand for fast grocery delivery in urban markets.
2. Strategic Diversification
Swiggy’s acquisition of Dineout has enabled it to diversify into restaurant reservations and bill payments, a market previously dominated by Zomato. Dineout’s GOV grew by 98% to ₹2,200 crore, showcasing Swiggy’s ability to capitalize on non-core revenue streams.
3. Operational Improvements
The company reduced its promotional expenses by 26% and optimized operations, achieving an EBITDA loss margin of -0.2% in its core food delivery business. While Swiggy is not yet profitable, these metrics indicate significant progress toward financial sustainability.
Competitive Landscape
Swiggy’s performance comes against the backdrop of Zomato’s recent profitability milestone, with the latter reporting a net profit of ₹351 crore for FY24. Despite this, Swiggy shares continues to hold a strong position due to its diversified offerings and growing quick-commerce presence. The IPO aspirations of both companies highlight the intensifying competition in India’s food delivery sector.
Future Outlook
With its IPO planned for early 2025, Swiggy shares is expected to attract substantial investor interest. Its valuation, estimated at up to $15 billion, remains lower than Zomato’s $26 billion, but Swiggy’s steady loss reduction and revenue growth underscore its potential for long-term success.
Swiggy’s Q2 performance reflects its resilience and adaptability in a competitive market. The narrowing losses, growth in key business segments, and optimistic investor sentiment provide a positive outlook for the company’s future. As Swiggy continues to refine its operations and diversify its offerings, it remains a formidable contender in India’s booming online services industry.
Swiggy’s recent developments come at a crucial time, as the company prepares for its highly anticipated IPO in 2025. With improving financial metrics and increasing market share, the company is poised to attract both retail and institutional investors, further solidifying its role as a leader in India’s on-demand economy.
