Neutral Swiggy Ltd for the Target Rs.450 by Motilal Oswal Financial Services Ltd
Improvement ahead of schedule
Measured QC investments to aid margins, but competitive risk looms ahead
* Swiggy delivered a revenue of INR49.6b in 1QFY26 (up 12.5% QoQ) vs. our estimate of INR49b. The food delivery (FD) business’s GOV grew 18.7% YoY, whereas the contribution margin (CM) contracted 50bp QoQ to 7.3%. FD’s adjusted EBITDA as a % of GOV margin dipped 50bp QoQ to 2.4% vs. our estimate of 2.5%.
* Instamart’s GOV was INR56.6b (up 107% YoY) vs. our estimate of INR 58b. The contribution margin expanded 100bp QoQ to -4.6%. Adjusted EBITDA as a % of GOV was -15.8% (-18% in 4Q), in line with our estimate of -16%.
* Overall, Swiggy posted a net loss of INR12b, marking an increase of 95% YoY.
* For 1QFY26, revenue/adj. EBITDA loss grew 54%/134% YoY. For 2QFY26, we expect revenue/adj. EBITDA loss to increase 50%/107% YoY. We believe execution has improved notably, with the improvement in QC AOV being an encouraging sign. We remain on the sidelines due to continued heightened competition in the sector. Our TP of INR450 implies an 11% upside from the current price. We reiterate our NEUTRAL rating on the stock.
Our view: AOV catching up with close peers
* AOV increase a key positive surprise: Instamart’s AOV rose 26% YoY and 16% QoQ—well ahead of the internal guidance. This was driven by the removal of low-value, unprofitable orders, higher Maxxsaver adoption, and increasing mix of non-grocery items (now 18.5% of GOV vs 6.6% a year ago). Management confirmed there was no seasonality in this surge—it was entirely structural. We expect AOV to continue trending up, albeit gradually, as assortment expands and ecosystem partnerships (brands, sellers) kick in to drive monetization and habit formation for Maxxsaver.
* Contribution margin to improve faster, but strategy carries competitive risk: Swiggy has paused further store expansion in quick commerce, indicating that its current footprint of 4.3m sq ft across 1,000+ dark stores can support 100% YoY growth. This should accelerate margin expansion, aided by operating leverage and reduced fixed costs. However, in a market where competitors are densifying aggressively, this more measured approach may leave Swiggy exposed if network reach or delivery speeds start to lag. We expect near-term margin gains, but the strategic trade-off adds medium-term competitive risk.
* FD GOV continues to surprise; 10-minute ‘Bolt’ gaining traction: FD GOV rose 18.8% YoY—its second-best growth in nine quarters—despite a seasonally weak Q1. Swiggy’s 10-minute format, Bolt, now continues to account for 10-12% of FD orders, with unit economics close to the platform average due to tighter delivery radius and lower delivery fees. We expect continued GOV momentum as Swiggy scales newer formats and penetrates deeper into Tier-2 cities.
* No structural concern on FD margins; softness was seasonal: FD’s EBITDA margin contracted to 2.4% due to seasonal rider availability issues and one-off fixed cost increases tied to appraisals. Management emphasized this was temporary and reaffirmed its 5% medium-term margin target. We expect margins to rebound from 2Q onwards as operating costs normalize, GOV scales further, and platform innovations like Bolt deliver incremental efficiency without eroding profitability
Valuation and view
* We now value FD on EV/EBITDA (FY27e) multiple vs DCF earlier; we ascribe Swiggy’s FD business a 10% discount to Eternal. We acknowledge that Swiggy is growing faster, and once parity on EBITDA margin is achieved, this discount may not be warranted. We continue to value QC on DCF. We arrive at our revised price of INR450. We believe execution has improved notably, with the improvement in QC AOV being an encouraging sign. We remain on the sidelines due to continued heightened competition in the sector. Our TP of INR450 implies an 11% upside from the current price. We reiterate our NEUTRAL rating on the stock.
In-line FD GOV growth and Instamart adj. EBITDA margin
* Swiggy reported 1QFY26 net revenue of INR49.6b (+12.5% /54% QoQ /YoY) vs our estimate of INR 49b.
* FD’s GOV stood at INR80.9b (up 10%/18.7% QoQ/YoY) vs our estimate of INR79.5b. The company remains confident of achieving high-teens growth in the near term.
* Instamart GOV came in at INR56.6b (up 107% YoY) vs our estimate of INR58b. Darkstore rollouts included 41 new active stores in 1Q (vs c300 stores in 4Q).
* For FD, adjusted EBITDA as a % of GOV margin declined 50bp QoQ at 2.4% vs our estimate of 2.5%.
* Instamart’s adjusted EBITDA as a % of GOV was -15.8% (-18% in 1Q) vs. our estimate of -16%.
* Consol. Adj. EBITDA came in at negative at INR8.1b.
* Instamart reported a contribution margin of -4.6% (-5.6% in 1Q) vs. our estimate of -5.1%. Levers for 100bp improvement included higher advertising revenue, customer incentive rationalization, and operating leverage on other network costs (240bp), partially offset by headwinds from aggressive 4Q expansions (90bp) and take-rate dilution on non-groceries (~50bp).
* Swiggy reported a net loss of INR12b (est. INR11.2b), marking an increase of 95% YoY.
Key highlights from the management commentary
* FD: GOV stood at INR80.9b, rising 10% QoQ and 18.7% YoY. The company remains confident of maintaining high-teen growth in the near term.
* The resilient GOV performance was driven by a growing MTU base, enabled by better execution—particularly in Tier-2 cities—and improved consumer propositions, which also helped expand GOV per MTU.
* ‘Bolt’ now contributes over 10-12% of total orders. It has a minimal impact on AOV and is not dilutive at the platform level. Its economics are close to the platform average, despite no incremental monetization.
* Instamart: AOV increased 26% YoY, which is a key driver of profitability. Order growth was deliberately moderated by phasing out low-value orders that hurt P&L. The Maxxsaver basket-building program helped consolidate orders. Retention among Maxxsaver users is higher, supporting AOV growth. The company expects orders to rise going forward.
* Non-grocery penetration is still low, but the share of these products will continue to grow over the next few quarters. Increased assortment is planned across a wider coverage area.
* The company believes its current dark store network can support 2x growth. Future expansion will be need-based, not broad-based.
Valuation and view
* We now value FD on EV/EBITDA (FY27e) multiple vs DCF earlier; we ascribe Swiggy’s FD business a 10% discount to Eternal. We acknowledge that Swiggy is growing faster, and once parity on EBITDA margin is achieved, this discount may not be warranted. We continue to value QC on DCF. We arrive at our revised price of INR450. We believe execution has improved notably, with the improvement in QC AOV being an encouraging sign. We remain on the sidelines due to continued heightened competition in the sector. Our TP of INR450 implies an 11% upside from the current price. We reiterate our NEUTRAL rating on the stock.
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