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SWIGGY’s (SWIGGY IN) food delivery (FD) GOV grew 17.7% YoY in Q2, at the lower end of its 18-20% guidance, while it continue d to guide for FD ’s adjusted EBITDA margin to reach 5% of GOV. Instamart ’s GOV grew 16.7% QoQ, but growth quality partly weakened, as NOV -to-GOV conversion fell to 71% from 74% on pricing interventions (its loss widened 15% QoQ ). Despite cutting our multiple for FD to 34x and for Instamart to ~0.2x NOV (TP revised to INR 300 from INR 350), w e upgrade Swiggy to Buy as our FD value plus net cash is 23% above CMP, implying zero value for Instamart and an implied valuation of Food Delivery below our estimate, making the recent sell -off overdone.

Food delivery – Profitability encouraging; growth at lower end:

SWIGGY reported a n in -line growth , led by broad -based show in FD and quick commerce (QC). For FD, GOV grew 17.7% YoY, at the lower end of the 18 -20% guidance. For FD, adjusted EBITDA improved 17% QoQ to INR 3.4bn, with margin up 32bps QoQ to 3.4% of GOV. Medium -term FD margin guidance of 5% of GOV was retained , reflecting confidence in sustained operating leverage. However, we have pared FD valuation, factoring in elevated competiti on and possibility of margin falling short of guidance by ~70bps. While the underlying FD franchise is attractive, our revised multiple captures its fair value, with limited scope for a meaningful near -term re -rating

QC valuation to compress further; profitability execution critical for re-rating:

Instamart's growth has improved, but monitor its quality as NOV -to-GOV conversion fell to 71% from 74% a quarter ago, indicating that SWIGGY used discounting and pricing interventions to drive growth. We reduce our multiple for Instamart to ~0.2x NOV from 0.4x, reflecting the renewed rise in EBITDA loss and limited near -term visibility on sustainable profitability. While SWIGGY is optimistic on unit economics, we would prefer to see 2-3 consecutive quarters of sharp reductions in EBITDA los s. The transition to 1P is a potential catalyst, if execution translates into sustained contribution breakeven and lower EBITDA loss. Competitive intensity needs to stabilize, with no further escalation in pricing aggression from players such as Zepto. We have widened Instamart's implied market cap/NOV disc ount to Blinkit to ~80% from ~60%, reflecting the divergence in profitability and execution. This discount should narrow only with tangible improvement in contribution margin and a sustained reduction in EBITDA loss, neither of which is sufficiently visibl e yet.

Upgrade to Buy; TP cut to INR 300:

We raise revenue estimates by 3 -4% for FY27E -29E and widen our FY27E EBITDA loss estimate by 32%. We value FD at 34x Dec -28E EV/EBITDA (from 38x), as we retain a ~10% discount to ETERNAL (cut to 38x from 42x), and Instamart at ~0.2x EV/NOV . Thus, w e pare our SoTP -TP to INR 300 (from INR 350) but upgrade to Buy from Accumulate, following a ~22% decline in share price over the past three months. For FD, our EV of INR 676bn plus net cash exceeds Swiggy’s current market cap of INR 584bn by 23%, implying not just zero value for Instamart but discounting the standalone value of FD itself . At CMP (adjusted for net cash and Instamart), FD trades at 20x EV/ EBITDA (post -ESOP) on FY29E, below QSR company valuations and we view discount as unwarranted. Higher -than - expected losses in Instamart and slower margin expansion in FD are key risks .

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