Diving into Swiggy’s Q2 FY2025 earnings

Everything quick, profitability slow and investment fast

Author

Arjun Juneja
December 04, 2024

Author’s note: Welcome to Episode 10. I write about Swiggy’s Q2FY2025 earnings, key insights drawn from its earnings report and call, and its focus for the next 6 months. Enjoy reading and remember to drink water 💧 today. Please reply to my email or comment here with thoughts and inimitable post ideas. I started another newsletter with thoughts on figuring out life (Newsletter link here) if you want to subscribe 🙃 

Table of Contents

1. Introducing Swiggy

Swiggy is a hyperlocal commerce company in India. It is a B2C (business to consumer) focused marketplace that began by connecting customers to restaurants for food delivery. It now fulfills food delivery (Swiggy), quick commerce (Swiggy Instamart), dining reservations (Swiggy Dineout) and parcel orders (Swiggy Genie) on its superapp. 

Swiggy listed on the Indian public markets in November 2024 with a $1.4 billion issue and a valuation of $11.3 billion. Its closest competitors include Zomato (listed in July 2021) and Zepto (privately held). Other competitors in food delivery include Magicpin and in quick commerce include Flipkart (Flipkart Minutes) and BigBasket (BigBasket Now).

2. Business in Numbers

a) Key takeaways from Q2 FY2025

i) Swiggy Instamart’s #1 city drove 21% of QC Gross Order Value (GOV) i.e. ₹710 crore with 17% of stores i.e. 103 stores. This is relatively broad based growth vis a vis Blinkit with its #1 city Delhi that accounted for 47% of GOV in Q4 FY2024 and still leads with sub 40% GOV (upwards of ~₹2,000 crore). From Instamart’s 54 cities, its top 7 cities drove 84% GOV with 77% of stores.

ii) Swiggy team presently considers 75 cities as the market size for QC. With stores in 54 cities, new market entry is now possible in 21 additional cities. Thereafter, Swiggy will have to set up stores within existing cities and drive higher orders/ day/ store. For context, Swiggy’s mature stores achieve 2,000-3,000 orders per day and on a long-term basis, its team suggested ~2,000 orders/ store/ day (65.3% higher than its existing 1,210 orders/ store/ day)

iii) Instamart has 609 dark stores with avg active store size of 3,202 sq feet (up 7.5% QoQ). It plans to double store count YoY from 523 (March 2024) to 1,046 stores (March 2025) with 4 m sq feet implying an avg dark store size of 3,824 sq feet (up 19.4% from Q2 FY2025). This will be driven by scaling existing stores to 3,500-4,500 sq ft and adding ‘megapods’ (8,000-10,000 sq ft stores).

iv) QC Average Order Value (AOV) struggles continue as it inched up to ₹499 (up 2.4% QoQ, 7.8% YoY). Instamart plans on double digit annual AOV growth, but it still has substantial catching up to Blinkit’s AOV of ₹660 (32.3% higher). This also reflects in Blinkit’s ₹6,132 crore GOV (81.3% higher) versus Instamart’s ₹3,382 crore GOV.

v) Swiggy nearly doubled its cash balance with the ₹4,359 crore primary fundraise adding to the existing balance of ₹4,531 crore. This infusion aids investments in QC buildout and marketing, and will further boost treasury income. For context, treasury income had soared QoQ from ₹112 crore to ₹165 crore in Q2 (up 47.3%). 

b) Q2 FY2025 overview (Swiggy food delivery and Instamart)

Swiggy pioneered food delivery and quick commerce and yet it was overtaken by Zomato and Blinkit in both categories. It has now pioneered a new proposition in Bolt that accounts for ~5% of food delivery GOV within 45 days of launch.

As of Q2 FY 2025, Swiggy food delivery achieved a Gross Order Value (GOV) of ₹7,191 crore (lagging Zomato by 34.8%) and adjusted EBITDA of ₹112 crore (1/3rd of Zomato). On a quarterly basis, it logged 5.6% GOV growth. The average monthly transacting users have grown 13.9% YoY and 5% QoQ to 14.7 million (1.47 crore) users.

Swiggy Instamart (QC) has grown much faster than its food delivery arm with uplift in revenue and profitability metrics, even as it remains negative on a contribution margin (CM) level.

As of Q2 FY 2025, Instamart achieved a Gross Order Value (GOV) of ₹3,382 crore and adjusted negative EBITDA of ~₹358 crore. On a YoY basis and QoQ, the QC GOV grew 75.5% and 24.2% respectively. The average monthly transacting users have grown 51.2% YoY and 19.2% QoQ to 6.2 million (62 lakh) users, still 43.5% below Blinkit’s 8.9 million (89 lakh) users.

Swiggy Instamart’s GOV is now 47% of Swiggy food delivery GOV and it has significantly improved CM from -3.2% to 1.9% QoQ.

3. Swiggy’s next 6 months

As a public company, Swiggy will have to get accustomed to the public glare and deal with a volatile stock price subject to competitive intensity that has exemplified the rise of quick commerce. Flipkart Minutes launched in August 2024, BigBasket pivoted to QC only in September 2024 and Amazon’s Tez is coming in the next 2 months.

These challengers will continue to bear down on the top 3 QC players (Zomato, Swiggy and Zepto). However, none of the incumbents stood still with each of them raising significant sums in November 2024. Zepto supplemented its $1 billion warchest (June- August 2024 fundraise) with an additional $350 million, Swiggy raised $532 million in a successful IPO and Zomato kept its crown with its $1 billion November fundraise.

a) Growth at all costs

Instamart achieved a -1.9% CM for its QC business in Q2 FY2025. It clawed back 130 basis points QoQ and at this trajectory would be expected to shortly achieve CM breakeven. However, it has publicly stated that it expects to achieve QC CM breakeven by Q3 FY2026.

This conservative take allows the QC team to build out its store count and aggressively drive greater GOV with increased orders/ store/ day. It is focused on achieving its short-term target of 1,046 stores in Q4 from 609 stores in Q2. For context, it opened 52 stores in Q2 (highest store addition in 5 quarters) and now has to add an average of ~218 stores per quarter for the next two quarters.

This will be incredibly hard but Instamart has no option with Blinkit at 791 stores and Zepto with ~700 stores. Blinkit has a target of 1,000 stores and Zepto has a target of 1,200 stores by Q4.

b) Innovation in everything

Swiggy has talked up its Bolt offering which enables food delivery in 10 minutes. This is a step-change innovation in food delivery and Zomato presently does not compete in this space. It can be a real differentiator if it significantly adds up in GOV and contribution terms to Swiggy.

The company has just announced Bolt’s scale-up to 400 cities. It may eventually flip Swiggy’s food delivery #2 ranking if Zomato is unable to answer with a similar or better offering. In the Q2 earnings call, Swiggy executives claimed that the time to launch is a moat along with the backend complexity required to run this across 400 cities (assuming 1,000+ outlets with 10,000+ delivery partners).

The company requires such breakthrough innovation in QC considering its double digit quarterly growth profile vis a vis food delivery’s single-digit quarterly growth. Additionally, it lags in the live events space with its Dineout offering the only answer to Zomato’s standalone live-events District app.

c) Revenue from everywhere

Swiggy used to be valued higher than Zomato in 2021-22 but it eventually listed at $11.2 billion in November 2024 in contrast to Zomato’s $27-$28 billion market capitalization. This discount reflected Swiggy’s #2 position in food delivery and #2 / #3 ranking in QC. More importantly, it stemmed from the fact that it had not achieved sufficient scale to realise its first rupee of profit.

This continues to hold true with Swiggy’s executives claiming profitability will be achieved in Q3 FY2026. It is a long road and it is in sight for food delivery (EBITDA to be scaled from 1.6% to ~5%). For the prized QC arm, it will require a series of interventions.

The management believes it can boost QC take rates from 15.2% to 20%-22%. This requires optimisation on the ads side-- management estimated driving 4%-6% of GOV as ad revenue. This is typically high margin and will significantly improve its prospects.

Other measures will include hiking delivery fees and expanding the business enablement services offered to QC sellers. In the earnings call, it was claimed that warehousing infrastructure has been built under the supply chain and distribution vertical, and this could be an upsell for QC sellers.

Zepto has shown a few interesting monetisation avenues with its white-label fresh meat brand Relish and its fast-scaling Zepto Cafe that is their own-kitchen variant of Swiggy Bolt’s restaurant partner-led 10 minute food delivery.

Arjun’s picks

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