Shares of Swiggy, the leading food and grocery delivery service, took a significant hit on February 6, 2025, plunging 7.4% to settle at ₹387 per share. This decline follows the announcement of the company’s dismal third-quarter report, which revealed widened losses and prompted most brokerages to lower their target prices, triggering selling pressure among investors.
Swiggy’s consolidated loss for the third quarter of FY25 ballooned to ₹799 crore, up 39% from the ₹574 crore net loss reported during the same period last year. Despite these challenges, the company boasted substantial revenue growth, reporting ₹3,993 crore for Q3, reflecting a 31% year-on-year increase from ₹3,049 crore.
Despite the alarming losses, Swiggy noted growth across several key metrics, including gross order value (GOV), which reached ₹12,165 crore—a 38% rise compared to the previous year’s figure. Adjusted EBITDA, another important profitability measure, reduced by 2% year-on-year, totaling ₹490 crore, but saw quarterly increases reflecting operational growth patterns.
Analysts attributed Swiggy’s widening losses largely to the pressures from increased competition and aggressive dark store expansion. According to Nuvama Institutional Equities, the rapid increase of dark stores may have created headwinds, significantly impacting the company’s overall performance. The research house expressed concerns about how these expansions could affect profitability going forward.
Some brokerages maintained optimistic outlooks for Swiggy's long-term viability and market positioning. UBS retained its 'Buy' rating on Swiggy, albeit with updated target prices of ₹515, citing the platform's extensive operational growth. Conversely, Macquarie downgraded to 'Underperform' with targets slipping to ₹325, emphasizing rising competitive pressures and margins adversely affected by network expansions.
Further compounding the difficulties faced by Swiggy was the investor sentiment hurt by the share price slump. After entering the stock market with great expectations, Swiggy's share price had soared as high as ₹617 but has since lost around 37% of its value during the calendar year 2025 alone. The declining stock was quickly matched by concerns over the municipality sector’s potential for profitability.
Historical evaluations by brokerages showcased the duality of Swiggy's performance across segments. The food delivery business, pivotal for the company’s operations, still demonstrated stable growth. Its contribution margin improved by 3% to 7.4% over the previous quarter, signaling potential resilience amid competitive pressures.
Despite Swiggy’s operational challenges, the management remains convinced about maintaining growth strategies, assuring shareholders of their ambitious targets for both revenue and dark store area expansions. Management stated plans to double the active dark store area to 4 million square feet by March 2025, aiming to gain share even within the hyper-competitive space.
Analysts continue to debate the future of Swiggy amid the persistent challenges presented by competitors, particularly Zomato, whose strategic advantages in the market appear more pronounced. Yet, as some brokers note, Swiggy’s Bolt service—offering 10-minute food delivery—has revitalized the competitive food delivery atmosphere, potentially helping regain customer attention and market share.
With expectations for Q4 revisions on the horizon, many analysts suggest cautious optimism but urge investors to keep close watch on Swiggy’s developments, particularly around competitive dynamics and economic shifts affecting user spending intentions.
Reflecting on the broader takeaway from Swiggy's results and market performance, it's evident the company remains at crossroads. On one hand, its growth metrics shine with promising revenue increases; on the other, the mounting operational losses coupled with falling shareholder confidence leave investors pondering the route forward for the once-dominant player within food delivery realms.
To sum up, as Swiggy grapples with its market position amid tightening competition, aggressive investments, and rising operational expenses, its future appears fraught with both challenges and opportunities. Investors, intrigued by the company's strategic pivots, are left evaluating whether Swiggy can stabilize its losses and continue to thrive against the backdrop of rigorous industry competition.