Swiggy Shares Tumble 7.43% as Quick Commerce Expansion Weighs on Margins

Swiggy’s shares dropped 7.43% to ₹387 after its Q3 FY25 earnings revealed a widened net loss of ₹799 crore due to increased competition and aggressive dark store expansion. Despite a 31% YoY revenue growth to ₹3,993 crore, profitability concerns led to mixed analyst reactions, with target prices ranging from ₹325 to ₹740. While some brokerages remain optimistic about long-term growth, near-term challenges in quick commerce continue to pressure margins.

CONTENTS:

• Swiggy Shares Plunge 7.43% to 52-Week Low Amid Rising Losses in Q3 FY25
• Swiggy Shares Drop 8% Amid Profit Decline and Expansion Challenges
• Swiggy Shares Drop 7.43% as Quick Commerce Expansion Pressures Margins

Swiggy Shares Tumble 7.43% as Quick Commerce Expansion Weighs on Margins

Swiggy Shares Plunge 7.43% to 52-Week Low Amid Rising Losses in Q3 FY25

Swiggy Shares Tumble 7.43% as Quick Commerce Expansion Swiggy’s shares tumbled 7.43% today, reaching a new 52-week low of INR 387.00 on the BSE following its Q3 FY25 earnings report, which revealed a widened net loss of INR 799 crore—up 39.1% year-over-year (YoY) from INR 574 crore in the same period last year. However, the stock later recovered some losses, trading 3.85% lower at INR 402 as of 10:25 AM.

At this price, Swiggy’s market capitalization stood at INR 91,038.56 crore, with trading volume at 2.33 crore shares. The stock has now fallen 37.27% from its peak on December 23, 2024, and slipped below its IPO issue price of INR 390, reflecting a 6.06% drop from its BSE listing price of INR 412.

Despite the increasing losses, Swiggy’s operating revenue grew 31% YoY to INR 3,993.1 crore. The company also reported strong performance across its key verticals—food delivery, Instamart, and out-of-home consumption. Its average monthly transacting users (MTU) rose 25.3% YoY to 17.8 million.

Brokerage firms had mixed reactions to the results. UBS maintained a “buy” rating with a target price of INR 515, while Macquarie reiterated its “underperform” stance, setting a price target of INR 325.

Swiggy went public on November 13, 2024, debuting at INR 420 on the NSE, an 8% premium over its IPO price of INR 390. On the BSE, it opened at INR 412, marking a 6% premium.

Swiggy Shares Drop 8% Amid Profit Decline and Expansion Challenges

Swiggy Shares Tumble 7.43% as Quick Commerce Expansion Swiggy’s stock plunged 7.8% on Thursday, reaching a new 52-week low of ₹385.25. In the pre-open session, the stock was down 6.5%, suggesting an opening price of ₹391. The decline followed a weak Q3 FY25 earnings report, where profitability took a hit due to aggressive dark store expansion and growing market competition.

Dark Store Expansion Poses a Challenge for Q4

Nuvama Institutional Equities highlighted that Swiggy ramped up its dark store expansion in the latter half of Q3, with further acceleration in January. This expansion is expected to pressure Q4 financials. While growth remained in line with expectations, profit margins fell short. Instamart’s adjusted EBITDA margin dropped by 420 basis points (bp) quarter-over-quarter (QoQ), and its contribution margin (CM) declined by 270bp QoQ. The CM drop was partly attributed to new store additions, but existing stores also saw margin compression. Swiggy’s management plans to double its active dark store area to 4 million sq. ft. by March 2025, up from 1.5 million sq. ft. a year prior.

Brokerages React to Swiggy’s Profitability Concerns

Motilal Oswal noted that Swiggy’s aggressive expansion has negatively impacted profitability. The brokerage forecasts a net profit margin of -19.5% in FY25, improving to -11.4% in FY26 and -5.4% in FY27. It maintained a ‘Neutral’ rating on the stock with a target price of ₹460, citing continued competition and near-term profitability challenges in the quick-commerce sector.

Bernstein, an international brokerage, lowered its target price from ₹635 to ₹575 while maintaining an ‘Outperform’ rating. It sees Swiggy’s food delivery business gaining market share over Zomato but noted that its quick-commerce segment is struggling in a highly competitive landscape.

CLSA also maintained an ‘Outperform’ rating with a target price of ₹750, stating that while food delivery is progressing toward profitability, quick commerce remains a hurdle. However, it viewed Swiggy’s expansion into more cities and dark stores as a long-term positive.

Swiggy Shares Drop 7.43% as Quick Commerce Expansion Pressures Margins

Swiggy Shares Tumble 7.43% as Quick Commerce Expansion Swiggy’s shares fell by 7.43% on Thursday, dropping to ₹387, as intensified competition in the quick commerce sector and aggressive expansion of dark stores pressured its profit margins. The company reported a Q3FY25 revenue of ₹3,993 crore, aligning with market estimates of ₹4,020 crore. However, its net loss widened to ₹799 crore, significantly exceeding the estimated ₹620 crore.

Analysts attributed the decline in profitability to rising competition and increased investments in dark store expansion. Nuvama noted that Instamart’s adjusted EBITDA margin dropped by 420 basis points (bps) quarter-over-quarter, while its contribution margin declined by 270 bps, suggesting existing store profitability also took a hit.

Motilal Oswal Financial Services (MOFSL) highlighted that while Swiggy’s food delivery segment remains a stable duopoly, quick commerce profitability expectations have been revised downward in the short term. However, the firm still sees potential, estimating an enterprise value (EV) to gross merchandise value (GMV) multiple of 0.7x for FY27. Despite the recent 30% decline from its peak, MOFSL maintains a neutral stance with a target price of ₹460, indicating a potential 10% upside.

ICICI Securities, on the other hand, maintained a ‘Buy’ rating with a higher three-stage DCF-based target of ₹740. They pointed out that while Instamart’s contribution margin decline was steeper compared to Blinkit, increased expansion into new cities (from 54 to 84) justifies higher pre-contribution expenses.

Overall, while Swiggy’s aggressive expansion strategy has weighed on short-term profitability, analysts remain divided on the stock’s long-term growth potential.