Swiggy shares fell 5.2% to an intraday low of Rs 212 on the BSE on Thursday, October 22, ahead of the food-delivery and quick-commerce company's second-quarter FY27 results. The decline followed a Buy upgrade from Anand Rathi last week, with the brokerage highlighting improving profitability while warning that renewed growth efforts could increase quick-commerce losses.
Key Takeaways
- Anand Rathi upgraded Swiggy to Buy last week with a target price of Rs 310.
- The brokerage expects efforts to close the growth gap with Blinkit to put pressure on quick-commerce profitability.
- Rival Eternal reported a 92.3% rise in Q2 FY27 net profit a day before Swiggy's scheduled results.
Table of Contents
- Swiggy shares retreat as growth and margins come into focus
- Food delivery provides the financial support
- Eternal results set the competitive backdrop
- Conclusion
Swiggy shares retreat as growth and margins come into focus
Swiggy enters the earnings announcement after reporting a consolidated net loss of Rs 791 crore in Q1 FY27, nearly 34% narrower than the Rs 1,197 crore loss a year earlier.
Anand Rathi's upgrade rests on its assessment that Swiggy is moving beyond a period when growth came at the expense of profitability. According to the brokerage, the company prioritised contribution margins over aggressive expansion during the past four quarters, moving from a peak loss margin of about 5.6% in Q4 FY25 to breakeven in Q1 FY27.
The next phase could bring a different trade-off. Anand Rathi expects Swiggy to try to narrow its growth gap with Blinkit over the next two quarters. It said that effort could push quick-commerce contribution margins within the guided range of 0% to -1% and result in larger EBITDA losses.
Food delivery provides the financial support
The brokerage identified food delivery as Swiggy's main profit generator, citing an EBITDA margin of around 3.1% in Q1 FY27 and gross order value growth of 17.4% year on year. The business also provides cash flow to support network expansion.
Anand Rathi expects food-delivery cash flows and treasury income, supported by a cash balance of about Rs 14,000 crore as of Q1 FY27, to fully cover quick-commerce operating losses by FY28 or the first half of FY29.
At the market price used in its assessment, the brokerage valued Swiggy at around 23 times estimated FY28 EBITDA. It argued that this offered exposure to quick commerce and dining out at no additional cost. That remains the brokerage's valuation view, rather than a reported financial outcome.
Eternal results set the competitive backdrop
Swiggy's results are due a day after rival Eternal reported Q2 FY27 net profit of Rs 125 crore, up 92.3% from Rs 65 crore a year earlier. Eternal's revenue from operations increased 77.6% to Rs 24,138 crore.
Within Eternal, Zomato's food-delivery net order value rose 21.5% year on year to Rs 11,445 crore. Blinkit's quick-commerce net order value reached Rs 20,940 crore, increasing 79.3% from a year earlier and 22.2% from the preceding quarter.
Conclusion
Swiggy's Q2 results were still pending at the time of the report. Anand Rathi's positive view hinges on food-delivery earnings supporting quick-commerce expansion, even if pursuing faster growth brings larger near-term losses.
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