Swiggy’s FY25 performance paints a contrasting picture of resilience in its core food delivery business and rising challenges in its quick commerce segment, Instamart. While food delivery demonstrated sustained growth with margin improvements and increasing contribution from initiatives like Bolt, Instamart’s widening losses and lagging performance against rival Blinkit have pushed back the profitability timeline. Anand Rathi has reiterated a "Buy" recommendation, albeit with a lowered target price of Rs400. Swiggy continues to innovate, particularly in out-of-home consumption and supply chain verticals, but must navigate fierce competition, rising operational costs, and shifting consumer behaviors.

Swiggy Retains ‘Buy’ Rating Despite Quick Commerce Headwinds

Anand Rathi has reaffirmed its ‘Buy’ recommendation on Swiggy, reducing the 12-month target price to Rs400 from Rs705 earlier. The firm applied a composite valuation methodology: 31.5x FY27e EBITDA to food delivery, 1.2x/1x EV/GOV for quick commerce and dining out, and 0.5x EV/sales for supply chain and platform innovation, with a 30% valuation discount to rival Zomato.

Swiggy's stock was last traded at Rs313, implying a potential upside of 28%.

Core Food Delivery Business Shows Promising Growth

Swiggy's food delivery (FD) segment registered a 17.6% year-over-year growth in Gross Order Value (GOV) in Q4 FY25, outpacing Zomato’s 15.9% rise. The success was largely driven by the 'Bolt' delivery model, now contributing over 12% of total volumes.

Adjusted margins in food delivery rose to 2.9% in Q4, up from 2.5% in Q3.

Contribution margins climbed to 7.8%, up 40bps quarter-on-quarter.

Monthly transacting users (MTUs) reached 15.1 million by Q4, an 8% annual increase.

Orders touched 636 million in FY25, with GOV at Rs288 billion.

Out-of-home consumption also turned profitable, delivering a 41.6% y/y GOV growth and contributing a 4.4% margin due to increased advertising revenues.

Instamart: Quick Commerce Lags Blinkit in Execution and Unit Economics

Despite 101% GOV growth, Swiggy’s Instamart continues to trail Blinkit’s 134% y/y growth. A key concern is the persistent EBITDA margin loss of -18%, compared to Blinkit’s relatively modest -1.9% in the same quarter.

The number of dark stores increased to 1,021 in Q4 FY25.

Instamart’s order volume rose to 286 million in FY25, yet contribution margins remained at -4.0%.

Average order value (AOV) stood at Rs527, versus Blinkit’s higher Rs665.

Swiggy has revised its profitability target for Instamart to FY28, pushing it back by one year.

Segment-Wise Revenue Breakdown and Strategic Focus

Swiggy's FY25 revenue was primarily driven by three verticals:

While the focus remains on food delivery and logistics, Swiggy is attempting to scale dining out and platform monetization in the medium term.

Revised Estimates Reflect Tougher Short-Term Landscape

Anand Rathi revised its FY26 and FY27 revenue forecasts downward by 2.4% and 6% respectively. EBITDA margin for FY26 is now expected at -9%, while FY27 is projected to break even at -1%.

Competitive Landscape Intensifies in Quick Commerce

Swiggy faces mounting pressure in the QC segment from rivals like Blinkit, Zepto, Flipkart Minutes, BigBasket Now, and Amazon. Increased competition is expected to push rental costs higher, especially in high-demand locations necessary for 10–15-minute delivery models.

If consumption demand remains subdued or execution delays persist, there could be downside risk to Swiggy’s growth targets, especially in QC and out-of-home verticals.

Key Takeaways for Investors

Buy Rating Maintained: Despite execution setbacks, Swiggy’s leadership in food delivery and logistics supports long-term confidence.

Target Price Revised to Rs400: Reflects near-term headwinds but a 28% upside potential.

Food Delivery Remains Strong: Bolt initiative and higher margins support positive momentum.

Instamart Execution Still a Concern: Profit timeline extended; Blinkit currently outperforms.

Cash Reserves Healthy: Rs67 billion in FY25, providing a buffer for expansion and innovation.

Disclaimer: Investors should perform their own due diligence and consider risk factors including regulatory changes, evolving competitive dynamics, and broader consumption patterns before making investment decisions.